Archive for: Political Services

Much has changed since Chancellor Rishi Sunak delivered his last Budget almost a year ago, but one thing which hasn’t is the need to tackle climate change and to protect the environment, both in the UK and internationally.

When the Treasury announced that 2021’s Budget would be on 3 March, it said that it would ‘set out the next phase of the plan to tackle the virus and protect jobs’. As the widespread calls, both from within the Government and from a wide variety of interested parties, to ‘build back better’ and deliver a ‘green recovery’ show, these two aims can be delivered in parallel.

So far, the Government has released some of the building blocks to inform and help deliver these aims. We’ve had the Ten Point Plan for a Green Industrial Revolution, the National Infrastructure Strategy, the Energy White Paper, the interim report of the Treasury’s Net Zero Review and the Dasguta Review on the Economics of Biodiversity. More strategies are promised, digging into some of the toughest areas of decarbonisation: heating, transport, energy-intensive industries. With the UK hosting COP26, the UN’s climate change conference, this year, the Government will want to show that it is leading by example.

But to deliver on these strategies, the Chancellor will need to pull some of the levers at his disposal. To look at it in the most simplistic way, the Government has two ways of doing this: spending and tax. Sunak could announce investment in technologies and projects to deliver a ‘green recovery’ or changes in taxes to incentivise others to do so, such as new reliefs. Equally, he could announce increases or adjustments to taxes to penalise those responsible for emissions and environmental damage, embracing the ‘polluter pays’ principle.

One tax which could rise is fuel duty. The Daily Telegraph recently reported that Conservative backbenchers believed that an increase is ‘inevitable’. A ‘Northern Tory’ told the paper that ‘the Government can wrap itself up in the green cloak of COP26 and the British public might not love it, but they will stomach it’. However, ending the decade-long freeze would not be without political problems. The Sun, which strongly backed the freeze, has already mobilised against the change, enlisting backbenchers Robert Halfon, who said ‘a fuel duty increase would level down – far from building back better and would damage the foundations of economic recovery’, and Craig Mackinlay, who claimed it would be ‘bad for the economy, bad for business and bad for jobs’.

The Times has reported that the Government has been considering options for new carbon taxes, with departments ordered to set ‘prices’ for emissions from all parts of the economy as part of a plan to ‘implement some form of carbon pricing’ in the next decade. This would form part of a strategy to ‘deliver a carbon price for the whole economy’ ahead of COP26. However, this plan has been blocked by Boris Johnson according to the Daily Mail.

BDO suggests that further changes to taxes linked to climate and the environment could be announced, such as capital allowances ‘that support the Government’s carbon reduction agenda’, new taxes on more single-use items such as coffee cups, or higher VAT rates for ‘environmentally damaging goods and services’.

If the Government is minded to go down this route, it would do well to examine the findings of a recent National Audit Office report that concluded the Treasury and HMRC ‘tend to focus more on the revenue that environmental taxes raise rather than the environmental impact they achieve’ and ‘do little’ to identify measures ‘which impact on Government’s wider environmental objectives but which are not recognised as environmental in nature’. If the Government wants to use the tax system to incentivise environmentally beneficial behaviour and penalise irresponsible activity, it needs to be sure that it’s doing so in an effective way.

Of course, another way in which the Government can act is for Rishi Sunak to produce the national chequebook. As the Institute for Fiscal Studies notes, ‘we need a plan for measures that increase the productive capacity of the economy and help steer and ease the transition to a new normal’ which should include ‘investments in physical and digital infrastructure, training, and science’ to help ‘achieve goals such as reaching Net Zero by 2050’.

The use of Government investment to deliver this green recovery is being advocated by business and unions. The TUC is continuing to push its plan to create 1.24m jobs in green infrastructure by bringing forward at least £85bn of infrastructure investment. This would see investment across a range of industries, including energy, land, buildings, transport, waste, manufacturing and digital, delivering a range of positive outcomes both for the environment and the economy.

The CBI has recommended that the Government commit to deliver seven more gigafactories by 2040 (these build batteries for electric vehicles), ensure that private sector investment is crowded-in by the new National Infrastructure Bank and invest in sustainable aviation fuels, as well as introduce reliefs for businesses which invest in property and machinery energy efficiency.

The Institute for Directors has advocated the creation of a ‘new digital and green Recovery Credit incentive for SMEs’, helping to support their investment in digital and green technologies, noting that at the moment British small businesses ‘tend to lag peer nations when it comes to adopting best practice’. It also wants a ‘retraining Recovery Credit incentive for SMEs’, which would especially focus on digital and green skills.

One area to particularly watch out for will be the future of the Green Homes Grants. Launched with much fanfare by Sunak as part of his Plan for Jobs last summer, recent news has not been encouraging. The grants were advertised as being worth £2bn, allowing homeowners and landlords to apply for vouchers for energy efficiency improvements. However, 95% of the £1.5bn for householders has not been spent and, while the grants have been extended until March 2022, the funding is not being rolled over to the next financial year. Instead, £320m will be available from March – a much smaller sum.

Shadow Business, Energy and Industrial Strategy Ed Miliband said that the Government was ‘denying homeowners the energy improvements they need, denying installers the work they need and denying the country the green transition we need.’ The Government blamed the low take-up on ‘an understandable reluctance on the part of the public to welcome tradespeople into their homes.’ If Sunak does want to revisit the design or funding of the scheme, the Budget would be a good opportunity.

With so much happening in the environmental and climate policy landscape in 2021 – including another budget, the UK’s Sixth Carbon Budget – it would be a missed opportunity if the Chancellor didn’t take the Budget as an opportunity to ensure that the Government’s tax and spending decisions were in line with its ambitious climate ambitions.

Vuelio Political clients will receive the Budget Summary on 3 March. 

The Government laid out wide ranging reform of the health and care system yesterday. The White Paper ‘Integration and Innovation’, marks a structural shift away from the coalition Government reforms of 2012, and sets out ambitious legislative proposals for a new Health and Care Bill. 

The main aims of the proposals are to integrate healthcare systems, reduce bureaucracy and strengthen accountability in the sector. Announcing the plans, Health and Social Care Secretary Matt Hancock said: ‘Even before the pandemic, it was clear that reform was needed to update the law, to improve how the NHS operates and to reduce bureaucracy… All parts of the system told us that they want to embrace modern technology, to innovate, to join up, to share data, to serve people and, ultimately, to be trusted to get on and do all that so that they can improve patient care and save lives.’

The plans propose that Integrated Care Systems (ICS) are rolled out across the country, bringing together NHS organisations, local government and wider partners at a system level. In order to increase collaboration, bureaucracy will be reduced and there will be greater flexibility for the workforce with increased data sharing mechanisms. Aiming to improve accountability and public confidence, the Secretary of State will have greater powers of intervention, including over a newly merged NHS England and NHS Improvement organisation.

Response to the proposals is mixed; although plans to integrate the healthcare system are largely positive, there is some concern over moving power away from NHS England to central Government. Additionally, with the health system still battling an acute wave of the coronavirus pandemic, some are concerned that now is simply not the right time for reform.

Shadow Health and Social Care Secretary Johnathan Ashworth welcomed integration plans, but asked for greater clarity on how the new structures will be governed. He called the decision to give more control to the Government a ‘power grab’ and suggested that changes to competition rules would leave the door open for ‘institutionalised cronyism at the top’.

NHS Providers suggested that the proposals provide an ‘important opportunity to speed up the move to integrate health and care at a local level’, but called for greater detail on the Secretary of State’s new powers over NHS England.

NHS Confederation called the reforms ‘vital for improving patient care’ after the 2012 reforms have ‘largely failed’.

Lou Patten, CEO of NHS Clinical Commissioners and NHS Confederation ICS Lead, called the decision to establish ICSs across the country a ‘logical step’ to build on the progress seen from the past few years. He called for greater detail on how the new systems will be governed, highlighting that retaining the expertise of senior staff throughout the restructuring process is essential.

Alzheimer’s Society said that with the pandemic exposing how ‘truly broken’ the social care system is, greater integration between health and social care is a ‘good step forward’. It argued that any reforms should come in conjunction to a social care system ‘overhaul’.

The Health Foundation also welcomed the decision to increase collaboration between services, suggesting that the proposals could bring ‘real benefits’. However, it argues that with the NHS facing huge challenges due the pandemic and rising waiting lists, a reorganisation of the health system could cause ‘distraction and disruption’. Furthermore, the decision to increase Government power is ‘politically driven’, it argued that ‘the Government’s handling of Covid-19 is no advert for more ministerial intervention in the health system’.

The King’s Fund also welcomed greater collaboration across the heath and care sector. Richard Murray, Chief Executive of The King’s Fund, said: ‘These new plans could give the NHS and its partners greater flexibility to deliver joined-up care to the increasing numbers of people who rely on multiple different services.’

However, it worries that under the new proposals, the day-to-day clinical and operational independence of the NHS will be diminished, and argued that devolving greater power to NHS England was one of the ‘successes’ of past reforms.

In a similar vein, the Institute for Government’s Nicholas Timmins has said greater ministerial control ‘threatens to take the NHS back to the wrong sort of future’. He suggests it could lead a ‘constant chopping and changing of goals’ and less public pressure from within NHS England, which would ultimately be to the detriment of long term performance.

Vuelio Political clients received their copy of the white paper summary yesterday. Find out more about our political products and services.

The Economy Summary is part of our Weekly COVID-19 Bulletin, sent every Thursday. You can sign up to receive your copy here.

Recent ONS data showed that the UK economy shrank by 2.6% in November as lockdown restrictions reduced economic activity. The decline followed a six-month growth spell, undoing some of the recovery in the economy. It means GDP is 8.5% below its pre-Covid-19 level from February 2020.

The economy is generally doing better than the OBR expected back in November – largely due to data revisions but also because of a smaller lockdown effect in November. However, with even tighter restrictions coming into force at the start of 2021, a ‘double dip’ recession looks inevitable.

The National Institute of Economic and Social Research argued that temporary and permanent adjustments post Brexit transition period are likely to also weigh on growth in the early part of the year, but the vaccine roll-out provides some encouragement for consumption and investment in the second half of 2021 and beyond.

Treasury minister Jesse Norman MP has suggested that tax rises may not be necessary if the economy bounces back strongly following an effective roll-out of the coronavirus vaccination programme. Speaking to the Treasury Select Committee, Norman said the economy could be sufficiently boosted by households and businesses unleashing pent up demand once restrictions are lifted.

The British Chambers of Commerce called for the Chancellor to provide urgent support for businesses across the UK that are facing a bleak future from the ‘debilitating squeeze’ of coronavirus restrictions. The BCC said that businesses cannot afford to wait until the Chancellor’s March budget, and proposes immediate measures to support cash flow including expanding business rates relief, prolonging VAT deferrals and offering an immediate, further round of upfront cash grant support, as well as maintaining the Job Retention Scheme at least until the end of July 2021.

Similarly, ahead of the Budget, the CBI also proposed extending the Job Retention Scheme to the end of June, lengthening repayment periods for existing VAT deferrals until June 2021 at the earliest, and extending the business rates holiday for at least another three months. It also calls for business rates reform to be ‘top of the list’ of action to be taken at the Budget.

Labour’s Shadow Chancellor Anneliese Dodds has stepped up her calls on counterpart Rishi Sunak to amend the Coronavirus Job Retention Scheme to give working parents the legal right to request paid flexible furlough. Currently, parents can ask to be furloughed for childcare reasons, but employers can reject the request. Labour said it wants the current request system to be turned into a legal and enforceable right to apply – with an expectation that employers would grant furlough, except in exceptional circumstances.

The Resolution Foundation joined opposition parties, anti-poverty campaigners and many Conservative MPs in urging the Government to extend the £20-a-week uplift in Universal Credit introduced during the first wave of the pandemic. They warned that not extending it would contribute towards the number of children in poverty increasing by 730,000 and would mean Boris Johnson would not be able to claim to be ‘levelling up’ the UK.

With one in three children projected to be living in relative poverty by the end of this Parliament, Children’s Commissioner for England Anne Longfield also called on the Government to extend the £20 Universal Credit uplift in the short term, but said it’s a sticking plaster ‘made as a result of short-term political embarrassment’, and argued for an overhaul of the current system.

Conservative backbenchers representing 65 Northern seats, many of them ex-Labour ‘red wall’ constituencies, have joined calls for the Prime Minister to cancel a planned reduction in the benefit. Labour has called an opposition day debate on the issue in the House of Commons last Monday, but Johnson has ordered his own MPs to boycott the vote rather than risk a significant rebellion. A non-binding Labour motion calling for the universal credit top-up to be kept in place beyond 31 March passed by 278 votes to none after the  Commons debate. Six Tory MPs defied party orders to abstain and voted with Labour, adding to the pressure on the PM on the issue. The motion, which will not automatically lead to a change in policy, was put forward by Labour as a way to put additional pressure on the Government to continue the increase.