The Rt Hon Jeremy Hunt MP

Chancellor of the Exchequer

HM Treasury

29th February 2024

Dear Chancellor,

We are writing to urge you to use the forthcoming Spring Budget to address the ongoing underinvestment crisis the UK is facing, and to deliver the public investment needed to futureproof our economy and our energy system.

The Government reported this month that emissions have halved since 1990, with 40% of the country’s electricity now coming from renewables. However, with the Climate Change Committee (CCC) warning that the UK is unlikely to meet its commitment to cut emissions by 68% in just six years’ time, and that doing so would require the rate of emissions reduction outside the power sector to almost quadruple, it is clear that the pace of decarbonisation must accelerate, rather than slow down.

Investment is essential to delivering on our climate targets and creating an economy that is resilient to future shocks. We are therefore deeply concerned that the UK ranks the lowest in the G7 for private investment, and below the average for public investment. According to the IPPR, if public and private investment had reached the G7 average over the last 16 years, an additional half a trillion pounds would have been invested into the UK economy.

At the Spring Budget, we therefore urge you to heed the IMF’s recent warning to prioritise public spending in areas such as health, education and tackling climate change, above tax cuts, as a means to increase productivity, deliver economic prosperity and support the transition to a zero-carbon society.

Although a majority of the investment required to meet our climate targets will likely come from the private sector, the lack of framework and certainty is holding this back. A Net Zero Investment Plan with sectoral financing roadmaps would provide much-needed clarity, ensure that public resources support our decarbonisation objectives, and help to unlock the potential of the private sector. A recent report from the London School of Economics also reinforced the potential of public investment to help crowd in private investment, and the British Chambers of Commerce and Confederation of British Industry have both called for public sector investment in the green transition.

Failing to deliver this investment would both deprive the UK of the economic benefits and create more costs in the future. Indeed, the OBR has warned that delaying action on climate change could see public spending costs increase by around a half. The earlier we invest, the cheaper it will be. This is particularly the case when it comes to our continued reliance on expensive gas which, according to the OBR, could cost more than double the public investment required to deliver net zero.

Alongside investment in physical infrastructure and green technologies, the UK needs to step up its approach to building the skilled workforce necessary to meet the challenge of decarbonisation. Green Alliance estimates that approximately 300,000 more skilled workers are needed in the buildings sector alone. This presents an opportunity to create good, skilled jobs in every part of the UK, but much more financial support is needed to enable workers to retrain.

In addition to the boost to jobs and productivity, public investment in decarbonisation will bring significant health benefits. Ill-health caused by living in cold homes costs the NHS an estimated £540 million every year, which could be avoided through a comprehensive programme of investment in energy efficiency measures and affordable zero-carbon heat. The CCC has observed that the capital investment needed to get to net zero will more than pay for itself through savings on fuel, healthcare and other costs.

While we welcome the funding that has already been committed to home energy efficiency, we remain concerned that this falls far short of the level of investment needed. The Government’s latest fuel poverty statistics revealed that the average fuel poverty gap is now greater than at any point since the UK government began measuring it. Fuel poor households now pay on average £417 a year more for energy than if they were living in a more efficient home. This underlines the urgent need to invest in energy efficiency upgrades and step-up action to deliver on the Government’s 2030 fuel poverty target.

When such considerable long-term benefits to society are at stake, it is right that the state should support households with the upfront costs of adopting low-carbon technologies and energy efficiency measures. Well-targeted public investment now, including low-cost loans as well as further grants like the Boiler Upgrade Scheme, would support much more widespread take-up of these measures, creating jobs and accelerating the transition we need. Farmers and small businesses should also be supported with the short-term costs of the transition, to ensure they are never left worse off as a result of adopting green measures. The wider economy will reap the long-term benefits.

We urge you to:

• Use the forthcoming Budget to prioritise new public investment in the infrastructure and skills needed for the transition beyond fossil fuels

• Publish a Net Zero Investment Plan to identify and close the gap between actual and required financial flows, as recommended in the Independent Review of Net Zero in 2023

• Work with DESNZ colleagues to set out a plan to end fuel poverty and improve our energy security by ensuring every household has access to energy efficiency measures and fossil-free heat via a combination of grants and low-cost loans.

Yours sincerely,

Caroline Lucas MP                                                                  

Barry Gardiner MP                                                                 

Alan Brown MP                                                                       

Wera Hobhouse MP                                                               

Clive Lewis MP                                                                        

Ben Lake MP                                                                            

Stephen Farry MP                                                                   

Claire Hanna MP                                                                     

Professor Baroness Kathy Willis                                       

Richard Foord MP

Baroness Boycott

Nadia Whittome MP

Daisy Cooper MP

Baroness Natalie Bennett

Tommy Sheppard MP

Lloyd Russell-Moyle MP

Beth Winter MP

Claudia Webbe MP

Zarah Sultana MP