James Kirkup is Director of the Social Market Foundation.
Perhaps it’s because now, as then, I have Covid, but when I ponder Rishi Sunak’s approaching Spring Statement, my thoughts go back to March 2020. Then, Sunak made his bones with the British public with nerveless statements about the support he’d offer for an economy – and a population – teetering on the brink of panic.
Those early days of his chancellorship seem a long time ago now: it’s been a long two years. But there’s a lot to learn from those moments, even if both economics and politics have changed since then.
Then, the dominant issue was a pandemic that would prove to be longer and more serious than most people realised. Today, the same is true of what Westminster calls the “cost of living crisis”.
That phrase is so familiar that a lot of people who use it think that it’s old news – that everyone out there “up and down the country” knows full well how much prices will rise and real incomes will be squeezed.
Well, if they think that, they’re wrong. Rising prices, especially on energy, are still going to come as a nasty shock to a lot of voters. Just because us media and political types know something will happen, don’t assume the wider public does too.
So the first job for next week’s not-a-Budget statement is ruthless honesty about what’s coming – and the limitations of what the state can do, in the short term, about energy prices.
That doesn’t mean doing nothing. The compassionate, responsible response to rising prices should be to concentrate help on those who need it most. That should start with benefits uprating. As things stand, benefits will rise by 3.1 per cent in April, because that’s what CPI inflation was in September. But it’s now at 5.5 per cent and will likely exceed six per cent for the rest of the year.
If Britain really is One Nation, not two, then preventing a deep real-terms cut in the incomes of the poorest should be a priority for Sunak next week.
There’s more to do, of course. Current plans for a £150 council tax rebate for most homes and what amounts to a £200 loan towards energy bills are both over-complex and poorly targetted.
Instead, HMT could simply give £500 to every benefit-claiming household, and £300 to non-benefits households where no-one pays higher rate tax. That wouldn’t cost any more than the current plans: the SMF proposal would cost around £8.4 billion, pretty much the same as existing measures.
Simplicity and speed are key here. What’s needed is a return to the spirit of furlough: just get cash into the hands and accounts of people who need it.
And some people who don’t: the Treasury’s natural objections to the waste involved in universal payments are normally reasonable, but these – still – are not normal times. The strong and natural desire to declare that the exceptional circumstances of the pandemic have passed should not blind us to the fact that Russia’s war on Ukraine is another event of arguably even greater historical significance.
And that offers something of an opportunity, for a politician big enough to seize it. Here’s how Sunak can do so next week.
The immediate and obvious impact of Russian aggression on British lives is via energy. Even though we buy relatively little fossil fuel directly from Russia, we’re still exposed to international prices that are directly and badly susceptible to Russian malfeasance.
Hence the various Government schemes afoot to reduce that exposure: some more wind power, some more extraction from the North Sea, and some wishful thinking about the Saudis and others agreeing to pump more to prices down.
The remarkable thing about all these efforts is ministers almost totally ignoring the best path to reducing British exposure to international energy prices and so easing household energy bills: use less energy.
This is Sunak’s opportunity, though he’ll have to override Treasury orthodoxy and his own inclinations to take it.
By any international standard, Britain’s homes are poorly insulated and badly energy inefficient. This is one of those big, slow and boring national problems that successive governments have nibbled at then pushed aside over several decades.
There are many reasons for this. Voucher schemes are hard to design and easy to exploit: the people most likely to use them would probably have made home improvements anyway. There are always sexier, more immediate things to promise, which are more likely to pay off in time for the next election. No one wants to be the politician telling people to clear their lofts out and fill their wall cavities. Lagging is boring.
More recently, the Treasury has been resisting energy efficiency drives on the grounds that UK industry can’t deliver: not enough workers, not enough material, inadequate supply chains to provide it.
None of these problems is imaginary. But none is insurmountable, to someone with adequate ambition and understanding of how markets work.
The ultimate reason British energy efficiency schemes have failed over decades is a lack of consistency. No policy has stood for long enough to provide confidence and certainty, either to households or industry. The evidence from successful efficiency policies worldwide — New Zealand, Japan, the Netherlands, to name a few – shows that what’s needed above all is the long-term certainty that only strong government policy can offer.
And that’s what Sunak should offer next week: nothing less than a national mission to make Britain’s homes more energy efficient. That mission will take a decade and more, and should be put above party politics: the Chancellor should make a Big Tent offer to Labour to sign up to his aims.
Importantly, this can all be done without so much as mentioning the words Net Zero. The Chancellor’s public ambivalence on climate issues is regrettable, but might not hurt at all here. The best way to get the public to buy in to the national energy efficiency mission isn’t to talk about carbon foregone but pounds saved. The difference between Energy Efficiency Certificate Bands C and D is around £100 per year. And that’s a recurrent saving: who wouldn’t fancy £1000 more in their pocket over the next decade?
This doesn’t all have to be state provision, incidentally. Some banks and building societies are gagging to lend to households to fund home efficiency measures. The Chancellor should use his bully pulpit to egg them on, and prod the rest to do more.
This advice isn’t original or novel, because the energy efficiency issue is a longstanding one that hasn’t really changed. What has changed are the times.
Britain may not be a direct combatant in Russia’s war, but we face wartime economic impacts. That requires a response of similar scale, a great national effort to defend our homes and incomes from unnecessary over-exposure to international energy markets. If he wants to be
the leader of this decade, Rishi Sunak should use his statement next week to launch that unabashedly patriotic drive for energy efficiency, declaring loudly and proudly that it’s time to Lag for Victory.
James Kirkup is Director of the Social Market Foundation.
Perhaps it’s because now, as then, I have Covid, but when I ponder Rishi Sunak’s approaching Spring Statement, my thoughts go back to March 2020. Then, Sunak made his bones with the British public with nerveless statements about the support he’d offer for an economy – and a population – teetering on the brink of panic.
Those early days of his chancellorship seem a long time ago now: it’s been a long two years. But there’s a lot to learn from those moments, even if both economics and politics have changed since then.
Then, the dominant issue was a pandemic that would prove to be longer and more serious than most people realised. Today, the same is true of what Westminster calls the “cost of living crisis”.
That phrase is so familiar that a lot of people who use it think that it’s old news – that everyone out there “up and down the country” knows full well how much prices will rise and real incomes will be squeezed.
Well, if they think that, they’re wrong. Rising prices, especially on energy, are still going to come as a nasty shock to a lot of voters. Just because us media and political types know something will happen, don’t assume the wider public does too.
So the first job for next week’s not-a-Budget statement is ruthless honesty about what’s coming – and the limitations of what the state can do, in the short term, about energy prices.
That doesn’t mean doing nothing. The compassionate, responsible response to rising prices should be to concentrate help on those who need it most. That should start with benefits uprating. As things stand, benefits will rise by 3.1 per cent in April, because that’s what CPI inflation was in September. But it’s now at 5.5 per cent and will likely exceed six per cent for the rest of the year.
If Britain really is One Nation, not two, then preventing a deep real-terms cut in the incomes of the poorest should be a priority for Sunak next week.
There’s more to do, of course. Current plans for a £150 council tax rebate for most homes and what amounts to a £200 loan towards energy bills are both over-complex and poorly targetted.
Instead, HMT could simply give £500 to every benefit-claiming household, and £300 to non-benefits households where no-one pays higher rate tax. That wouldn’t cost any more than the current plans: the SMF proposal would cost around £8.4 billion, pretty much the same as existing measures.
Simplicity and speed are key here. What’s needed is a return to the spirit of furlough: just get cash into the hands and accounts of people who need it.
And some people who don’t: the Treasury’s natural objections to the waste involved in universal payments are normally reasonable, but these – still – are not normal times. The strong and natural desire to declare that the exceptional circumstances of the pandemic have passed should not blind us to the fact that Russia’s war on Ukraine is another event of arguably even greater historical significance.
And that offers something of an opportunity, for a politician big enough to seize it. Here’s how Sunak can do so next week.
The immediate and obvious impact of Russian aggression on British lives is via energy. Even though we buy relatively little fossil fuel directly from Russia, we’re still exposed to international prices that are directly and badly susceptible to Russian malfeasance.
Hence the various Government schemes afoot to reduce that exposure: some more wind power, some more extraction from the North Sea, and some wishful thinking about the Saudis and others agreeing to pump more to prices down.
The remarkable thing about all these efforts is ministers almost totally ignoring the best path to reducing British exposure to international energy prices and so easing household energy bills: use less energy.
This is Sunak’s opportunity, though he’ll have to override Treasury orthodoxy and his own inclinations to take it.
By any international standard, Britain’s homes are poorly insulated and badly energy inefficient. This is one of those big, slow and boring national problems that successive governments have nibbled at then pushed aside over several decades.
There are many reasons for this. Voucher schemes are hard to design and easy to exploit: the people most likely to use them would probably have made home improvements anyway. There are always sexier, more immediate things to promise, which are more likely to pay off in time for the next election. No one wants to be the politician telling people to clear their lofts out and fill their wall cavities. Lagging is boring.
More recently, the Treasury has been resisting energy efficiency drives on the grounds that UK industry can’t deliver: not enough workers, not enough material, inadequate supply chains to provide it.
None of these problems is imaginary. But none is insurmountable, to someone with adequate ambition and understanding of how markets work.
The ultimate reason British energy efficiency schemes have failed over decades is a lack of consistency. No policy has stood for long enough to provide confidence and certainty, either to households or industry. The evidence from successful efficiency policies worldwide — New Zealand, Japan, the Netherlands, to name a few – shows that what’s needed above all is the long-term certainty that only strong government policy can offer.
And that’s what Sunak should offer next week: nothing less than a national mission to make Britain’s homes more energy efficient. That mission will take a decade and more, and should be put above party politics: the Chancellor should make a Big Tent offer to Labour to sign up to his aims.
Importantly, this can all be done without so much as mentioning the words Net Zero. The Chancellor’s public ambivalence on climate issues is regrettable, but might not hurt at all here. The best way to get the public to buy in to the national energy efficiency mission isn’t to talk about carbon foregone but pounds saved. The difference between Energy Efficiency Certificate Bands C and D is around £100 per year. And that’s a recurrent saving: who wouldn’t fancy £1000 more in their pocket over the next decade?
This doesn’t all have to be state provision, incidentally. Some banks and building societies are gagging to lend to households to fund home efficiency measures. The Chancellor should use his bully pulpit to egg them on, and prod the rest to do more.
This advice isn’t original or novel, because the energy efficiency issue is a longstanding one that hasn’t really changed. What has changed are the times.
Britain may not be a direct combatant in Russia’s war, but we face wartime economic impacts. That requires a response of similar scale, a great national effort to defend our homes and incomes from unnecessary over-exposure to international energy markets. If he wants to be
the leader of this decade, Rishi Sunak should use his statement next week to launch that unabashedly patriotic drive for energy efficiency, declaring loudly and proudly that it’s time to Lag for Victory.