Tom Burke’s political commentary: One year on, coalition’s promise is under stress

ENDS Report 435, p. 61, April 2011.

David Cameron pledged his administration would be “the greenest government ever”. Forthcoming decisions on the Green Deal, Green Investment Bank and fourth carbon budget will reveal how serious he was

It is a year since the coalition government took power. Though distasteful to our more tribal politicians, the arrival of the first coalition government for more than 60 years was widely welcomed by the public. For the environmental community, prime minister David Cameron’s early promise to deliver “the greenest government ever” was especially welcome.

So, how are they doing so far? We should judge their environmental results against the broader cloth of their overall performance. And this should take proper account of the peculiar difficulties they faced on arrival.

They could hardly have picked a worse moment to begin a brave political experiment. The immediate crisis of finding £1.3trn to protect the British people from their bankers had passed. The political bills were now coming in. Two clear priorities quickly emerged: deficit reduction and growth. These were broadly understood and accepted by the public.

Initially, there was a sense that we were all in it together and that everyone was going to have to take some pain. Latterly, that benign mood has begun to sour. In part, this is because the amount of pain, who would have to bear it, when and for how long, has inevitably become clearer. But there has also been a wider undermining of confidence in the coalition.

There are now growing doubts, not only about what the government is trying to do, but also about whether it is any good at governing at all. It has quickly acquired two unfortunate habits: it often breaks promises and it frequently announces policies before it has thought about them. Falling confidence in its style of policymaking inexorably undermines belief in the policies.

The broken promises are accumulating fast. There was the clear pledge to stop carrying out top-down reform of the NHS, broken in the first few months of office. Nick Clegg has never recovered from his broken promise on tuition fees.

It is already clear that the government has no intention of keeping its promise not to subsidise new nuclear power stations. But it is possible, as the full scale of the economic consequences of Fukushima becomes more apparent, that this may be fulfilled after all.

It is still too soon to come to a final judgment on the prime minister’s green promise. But the absence of anything resembling a green element in the recent growth strategy was not a good sign. Nor was the Treasury caving in on the fuel duty rise while stealing the revenues from the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, thus putting carbon prices up and down at the same time.

The other bad habit has led to carts rolling through the corridors of power well ahead of the horses. The government’s approach to policy seems to be ‘ready, fire, aim’ and has not generated great headlines.

The absurdity of building an aircraft carrier with no planes is a lasting gift to a legion of comedians. The need to ‘pause’ health legislation already on its way through Parliament to confer with the professions has proved a challenge to communicate.

Crucial interests have often been consulted after the government has acted. One of the most damaging examples of this habit was the spectacular u-turn over the plan to sell off the Forestry Commission’s English assets.

This caused a firestorm of protest and deeply damaged environment secretary Caroline Spelman. This was especially unfortunate, because she had on three occasions privately advised the prime minister that the policy was not ready to go to Parliament.

The Green Deal is a flagship policy for the energy and climate department (DECC). Its aim is to dramatically improve the energy efficiency, and thus reduce the carbon emissions, of Britain’s badly insulated homes. At a time of rising energy prices it will allow the government to argue that it is working to drive down energy bills.

The idea is that homeowners will be able to save more on their bills than they will repay in loans to do the work. It is an innovative and attractive idea. It will relieve the need to find the upfront finance for the improvement and thus overcome one of the major barriers to raising the energy efficiency of our housing stock.

So far, so good. The Energy Bill which legislates for it is currently wending its way through the House of Commons and is expected to be law by the autumn.

Understanding the market

But it is clear that key corporate players needed to deliver the Green Deal – Centrica, B&Q, Marks & Spencer, for example – are unconvinced the policy is well thought through. There are growing doubts about whether officials really understand the willingness of the market to finance the scheme. The government’s ambitions for it and its operational details remain obscure.

These problems are compounded by the deal’s interaction with the Green Investment Bank (GIB). Treasury officials are still fighting tenaciously in the gloom of the bureaucratic trenches to break ministers’ repeated promise to establish a fully functioning and independent bank.

One of the many unresolved problems with the Green Deal is how to bridge the gap between the cost of borrowing and the returns from investments. In the early phases of the deal this is exactly the kind of finance best provided by a GIB. Why then are the Treasury and the business department (BIS) trying so hard to stop the bank financing energy efficiency?

Adair Turner, chair of the Climate Change Committee, is currently doing the rounds in Whitehall. He is seeking agreement on the committee’s proposals for the fourth carbon budget which will run from 2023-27.

Government agreement to the body’s recommendations would be an important signal of how seriously the UK intends to make a low-carbon transition. The government’s decision will be closely watched both by other governments and, even more closely, by the capital markets.

The promise to be the greenest government ever is not yet broken. But it is under stress. What is decided in the next few months about the Green Deal, the GIB and the fourth carbon budget, will tell us all we need to know.