much-needed investment, but there’s more to be done – Inside track

The spending review underlined the difficult spot the government is in. Growth is low and public finances are under strain. Reform is snapping at the government’s heels in its political heartlands. Public services and net zero urgently need more investment.

To square various circles, there were rumours that vital policies such as support for home decarbonisation and sustainable farming might be sacrificed to pay for spending in other areas like health.

It was a tricky balancing act but, in the end, it brought welcome news for action on climate and the environment and the wider benefits it can offer. As we set out in our full debrief, the chancellor was able to announce major increases in capital spending on transport and pledge to deliver the Warm Homes Plan, alongside other welcome commitments to farming and skills.

Warmer homes is good news
Confirmation of £13.2 billion for more efficient and lower carbon homes will provide real financial benefits to poorer households, as well as curbing emissions, and it is hard to believe that this manifesto commitment was ever seriously in doubt. The extra funding and other regulatory measures are expected to lead to the upgrading of five million homes over the course of the parliament.

The transport settlement was more of a mixed bag. Overall, the spending review means an unwelcome real terms cut to the transport budget. We had called for a real terms increase in capital investment though and the review duly delivered annual growth of 3.9 per cent in real terms between now and 2030.

The investment will be concentrated in historically underfunded regions such as the Midlands and northern England, and regional authorities will have considerable sway in how it is spent. The flipside is that this will largely be paid for by big cuts to current, or ‘day to day’, spending, which will almost certainly mean higher fares and possibly an end to the bus fare cap.

There was money for sustainable farming
Also taking a knock was the Department for Environment, Food and Rural Affairs (Defra) budget, which will decline by 2.3 per cent annually over the spending review period in real terms. While this isn’t great, our main priority had been avoiding deep cuts to the Farming and Countryside Programme, which fosters sustainable farming. The budget for this was held steady in cash terms, meaning a real terms cut, but it could have been a lot worse. There were also confirmation of how the funding is to be delivered, with most of the funding to be channelled through Environmental Land Management (ELM) schemes.  There was also a five per cent cash boost to the flooding budget, which is essential to helping communities cope with climate change,

The energy department got a good headline settlement in the review, with annual average real terms growth in its capital budget of 16 per cent (even excluding the £14.2 billion earmarked for Sizewell C). However, much of this will go on smaller nuclear reactors and carbon capture and storage. These are relatively expensive and untested solutions and must continue to be supported by cheaper and well tested solutions such as energy efficiency and renewables.

Overall, the spending review managed some real wins for the environment. The prioritisation of investment spending is also good for the economy, which means that this review has a better chance of being delivered in full. It may take a while before voters see the benefit but, in the long run, the country will be better off. Previous chancellors have ducked this issue and focused spending on things that deliver a short term political sugar rush. It is to the chancellor’s credit that she didn’t do this.

Image credit to UK House of Commons on Flickr