The UK government should invest £26 billion a year, or 1% of gross domestic product (GDP), in creating a sustainable economy, a new report suggests.
Authored by Nicholas Stern and other analysts at the London School of Economics (LSE), the report opened by stating that “chronic underinvestment” in a sustainable economy, from both the public and private sector, was slowing down the UK’s productivity growth.
It noted that the UK economy was 13% less productive than France, and 14% less productive than Germany, which has caused a decrease in living standards in the UK.
The report suggested that where the UK had invested, it was in unsustainable projects, such as new oil and gas licences in the North Sea and energy inefficient buildings, which pose risks not only to the environment, but also to energy security and public health.
To jumpstart growth, the LSE report urged for more investment in green energy – especially since wind and solar costs have decreased sharply in the past ten years – as well as green transport, energy-efficient housing, agriculture and waste management.
The report estimates that public investment, and clear governmental policies will help raise private sector investment in tackling climate change, and could lead to an annual private and public investment of £77 billion, or 3% of GDP, in green projects.
This strategy for growing a sustainable economy isn’t too different from the Labour Party’s proposed environmental policies. The party has pledged to spend £28 billion a year in green investments if it wins the next election, with much of its strategy centred on renewable energy, improving energy efficiency in homes, and creating green jobs.
With the LSE report pointing the finger at “fiscal austerity” as a key contributor to the UK’s stagnating productivity, this raises questions about whether the current Tory government, which is cutting public investment as laid out in the Chancellor’s 2023 Autumn statement, can really lead the UK on a path towards a successful Net Zero economy.
What can homeowners do to help the UK transition to a sustainable economy?
One key step towards creating a sustainable and growing economy, outlined in the LSE report, is decarbonising buildings. For the average homeowner, this means implementing energy efficiency upgrades and installing low-carbon heating, such as heat pumps.
Unfortunately, the costs of heat pumps and home insulation measures are too high for many Brits, which is why the LSE report is urging for more government support for energy saving home upgrades.
The government does currently have grants for home improvements and for heat pumps – notably the Boiler Upgrade Scheme – but more needs to be done if the UK wants to plug the cracks in its infamously ‘leaky’ housing stock.
The LSE report also notes that the government needs to remove “price distortions” that often make sustainable technologies more expensive.
For example, compared to gas boilers, heat pumps are more expensive to run, putting off many households who could afford a heat pump from getting one.
The reason heat pumps cost more to run than gas boilers is because electricity costs more than gas at the moment, but this could soon change.
Renewable energy is cheaper than fossil fuels to produce, and with record growth in renewables continuing year on year, electricity could soon become cheaper than gas. At that point, getting a heat pump would be a no-brainer for many.
