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Green Investment at the Heart of 2021 Budget

Most observers will have been expecting yesterday’s (Wednesday 3^rd March) 2021 Budget announcement to focus almost entirely on the UK’s efforts to recover from the impact of the coronavirus pandemic. While this was partly the case, green infrastructure and support featured as a key cornerstone of the Government’s future plans. It may not have gone as far as more optimistic climate change campaigners may have hoped, but many in the green sector will have found it a refreshing change to recent Budgets that have largely glossed over green commitments. Repositioning the UK as a leading scientific powerhouse further reinforces the reputation for British innovation, particularly for sustainable and net zero technologies.

Green Investment Announcements in the 2021 Budget

New funding options for the sustainability sector formed the core of new measures announced. A new UK Infrastructure Bank for green projects was one of the sustainability headlines. An initial pot of £12 billion will be allocated to green projects from the fund’s new headquarters in Leeds. This initial sum is expected to rise to £40 billion in total investment. The project will in part replace funding previously available from the European Investment Bank.

A new retail savings bond based on green energy investment was also announced, allowing savers to support projects that directly contribute to the UK’s net-zero ambitions. Projects including renewable energy, storage and clean transport will be able to secure financial support from National Savings and Investment (NS&I), described as the world’s first green savings bond.

Sustainability was also reflected in the announcement of a new Freeport scheme, announcing eight special economic zones across England designed to stimulate trading, with a stated ambition that they will support both ‘green jobs’ and renewable energy generation in their regions.

The extension to COVID bounceback loans and the introduction of a new ‘super deduction’ tax break of 130% of the capital value of investments will be welcome news to businesses considering high capital value projects, such as energy storage and resilience.

Despite green policy featuring prominently, some observers will have been disappointed at the lack of reference to a carbon tax, investment in EV infrastructure or addressing the need to improve the sustainability of the UK’s housing stock. Sir Kier Starmer led criticism of the budget for not going far enough in terms of the UK’s green ambitions. It took until the Labour Leader’s response for the ‘climate emergency’ to be directly addressed, accusing the Budget of falling far short of what is required, particularly due to the lack of a major green stimulus plan. He highlighted plans for a new coal mine in Cumbria as symptomatic of the Government’s failure to fully embrace the need for radical change.

While begrudgingly admitting that the new green savings bonds scheme represented a good idea, Starmer then reaffirmed his view that the Budget as a whole lacked ambition.