Creating a greener, fairer economy.

This article is based on the Young Fabian Economy & Finance Network’s event in Leeds Civic Hall on 25th October 2018.  

The speakers were Mhairi Tordoff (social housing professional and environmental activist), Prof John Barrett (UK Energy Research Centre), Ian Rigarlsford (Ecology Building Society), and Alex Sobel MP (Environmental Audit Committee and leader of SERA’s Parliamentary Network). 

To start his speech, Alex Sobel outlined what Leeds will need to look like in 2030 if we are to achieve a sustainable economy: “It will need to be unusual to see a diesel or petrol-powered car on the streets of Leeds. It will need to be unusual to see a house without a solar panel. And we will need to see total electrification of our infrastructure”. This is essential for Labour’s ambition to achieve ‘net-zero’ carbon emissions by 2050. 

These changes need to be backed by serious money – yet despite making some positive noises, the government has been dragging its feet on this for years. As Mhairi Tordoff pointed out, procrastination on climate change is incredibly dangerous. We are already seeing ice caps melting, coastlines flooding, wildfires raging, and extreme weather events becoming more extreme across the world. And beyond the effects of climate change, air pollution contributes to an estimated 40,000 premature deaths in Britain every year (according to the Royal College of Physicians). 

So, why isn’t action on pollution more popular? Why did David Cameron’s reported instruction to ‘cut the green crap’ raise so many cheers, and why do right-wing populists so easily win support for their anti-environment agendas? 

For Prof John Barrett, part of the answer is that our current approach to funding the green transition is regressive, placing disproportionate burdens on those who are least at fault and are least able to pay. According to the UK Energy Research Centre (UKERC), the poorest tenth of the British population spends 10% of their income on fuel bills, compared with just 3% for the richest tenth.  

This is because Britain’s green subsidies are funded in large part by levies on energy bills. This is effectively a flat tax on any household or business that consumes energy. It fails to account for differing lifestyles, due to the narrow focus on household consumption (which accounts for 30% of Britain’s carbon emissions). UKERC analysis shows that the richest tenth of the UK population spend 1.8 times more on funding green subsidies than the poorest tenth. Yet the richest tenth contribute to emissions at 4 times the rate of the poorest households. This disconnect helps right-wing populists to frame action on climate change as an elitist issue. 

While cross-border collaboration is vital, the speakers agreed that the European Union’s cap-and-trade Emissions Trading Scheme has fallen short. This is because lobbying led to the allocation of too many emissions allowances, meaning that their value has been too low to change large polluters’ behaviours. 

If the environmentalist left want to start winning more political battles, then we need to craft a popular agenda of our own. This starts with creating more progressive economic policies: and the speakers made some great contributions to this agenda.  

John Barrett suggested removing the green levies on energy bills, and funding them through general taxation instead. This would reduce costs for 70% of British households almost immediately, even once the increase in taxes is factored in, because general taxation is more progressive than our current energy bill levies. 

We discussed other tax reforms to increase fairness, including removing VAT on electric vehicles, removing Stamp Duty on homes which are compliant with Passive House standards, and providing funding to help millions of households to retrofit their homes with energy saving technologies (an emerging Labour Party pledge). These changes could boost innovation in the manufacturing and construction industries, while cutting costs for consumers who want to live more sustainably.  

Introducing pollution taxes would be less popular, but the speakers were keen on this measure too. Taxes applied to polluters would be more robust than cap-and-trade, would drive change in the private sector by making pollution more expensive throughout the supply chain, and would be more progressive than focusing narrowly on household energy bills.  

The Minister for Energy recently defended the Tories’ devastating cuts to the Solar Feed in Tariff scheme (FIT) by arguing that it is a subsidy for upper-middle class homeowners. Alex Sobel argued passionately against this, citing Leeds City Council’s work to install 7,000 solar panels on the city’s council houses, which was financed by the FIT. The panels have proven popular with residents, and have helped to save money on energy bills. However, the City Council’s work has ground to a halt due to a combination of austerity and FIT cuts, which have increased the repayment cycle to over 17 years. Reversing the FIT cuts could serve a social justice agenda, and help to bring much-needed private and local government investment into the fight against climate change. The Tories are consulting on plans to axe the FIT altogether: Labour activists must oppose this. 

Some environmentalists are nervous of funding more green funding schemes like FIT through general taxation, as they then compete against the Government’s higher-profile spending priorities, such as healthcare and education. But the speakers agreed that the answer to this is not to ‘hypothecate’ taxes or ringfence levies on energy bills: but to clearly and passionately make the case for creating a fairer and greener economy.  

We cannot do that by only using the austere language of cuts, bans and tight ‘natural capital’ budgets. As one attendee said: “We need to talk about what this will give us, not just what it will cost us”.  

Industry and good jobs are part of the Labour Party’s DNA. This means that unlike some Greens, we cannot sell a vision based around pipe dreams of ‘de-growth’, or a society built around leisure instead of work. Labour’s vision must play to our historic strengths, and be positive as well as achievable. Happily, a Labour environmental agenda can deliver this.  

Mhairi Tordoff pointed out that the boom in offshore wind is already bring skilled technical jobs and investment to coastal cities that were worst-hit by the decline of heavy industry. These are jobs that are based on fixed local assets, and are therefore less likely to be displaced over the long term than jobs in the service sector.  

Alex Sobel built on this by speaking about the economic opportunities that the green economy gives to British universities, manufacturers and builders to develop and deploy innovative technologies, citing Liberty Steel’s GREENSTEEL strategy. He also spoke about Leeds’ new district heating scheme, whereby heat generated by the Council’s recycling facilities will be sold to local households much more cheaply than the rates currently available through the grid. The proceeds can then be used to support the Council’s essential services, such as social care for vulnerable adults and children. The funding mechanisms mentioned above can help businesses and councils to invest in these initiatives. 

As Ian Rigarlsford noted, this ethos is at the heart of Ecology Building Society’s work to combine environment action with both social justice and long-term financial viability. Ecology is the only British building society that only finances sustainable housing developments, and it is signed up to the real Living Wage as well as the Fair Tax Mark.  

Their green mortgages have helped schemes like Lancaster Cohousing to become a reality, creating an estate that is built to Passive House standards and which includes green spaces, shared working facilities, and strong community structures. Ecology were the first lender to help finance London Community Land Trust’s development at St Clements, which has introduced an affordable housing guarantee by restricting all sale and rent prices to a low percentage of local incomes. Ecology have shown that these kinds of business model can be practical, and that cooperatives and mutuals have an important role to play in confronting our social and environmental challenges. 

Climate change and pollution are topics that often lend themselves to gloom and pessimism. But our speakers showed that we can find practical ways to tackle these issues while supporting our real economy and public services, creating more affordable housing, and putting more money in the back pockets of the many.  

With policies and ambitions like these, the environmentalist left can start winning again – and create a greener, fairer economy. 

Mark Whittaker is Chair of the Young Fabian Economy & Finance Network. 

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