Report doubts extent of green stimulus

By Jim Pickard
Published: March 30 2009 00:31

The paucity of the government’s recent “green stimulus package” is laid bare on Monday by a report that suggests environmental measures make up only 0.6 per cent of Britain’s £20bn recovery plan.
The analysis will step up the pressure on Gordon Brown amid expectations that the prime minister wants to give next month’s Budget a green tinge.

Last week a Downing Street spokesman said the government was determined to make sure that any economic recovery was based on low-carbon principles. “It is very clear that we need to embed these low-carbon principles in actions that we take,” he said.
But Monday’s report, compiled by the New Economics Foundation on behalf of Greenpeace, suggests that only £100m of the stimulus package is genuinely new money for green measures.
This is equivalent to 0.008 per cent of British gross domestic product – or one hundredth of the 0.8 per cent requested by Lord Stern, the author of a landmark 2006 government-commissioned report on the economics of climate change.
It is also a fraction of the bonus pool of £775m paid to staff at Royal Bank of Scotland this financial year.
Furthermore, its impact would also be counteracted by other measures in the package – such as the building of 520 miles of road lanes.
The analysis is embarrassing for the government as it struggles to switch Britain’s energy production away from fossil fuels to renewable energy sources.
Mr Brown said last month that 10 per cent of the British stimulus package was going towards “environmentally important technologies” and potential jobs in green industries; in line with President Barack Obama in the US.
In fact the specific green measures in the pre-Budget report were worth just £535m – about 2.5 per cent of the total – according to the NEF. Of this, the bulk consists of future spending commitments brought forward from the existing comprehensive spending review, such as £300m for new rail carriages.
The only additional spending is £105m for the government’s Warm Front programme, which gives grants to households to improve energy efficiency.
The government argues that its £2.3bn of aid to the car industry will – as well as save jobs – help make car production more “green”.
But the NEF points out that the programme’s criteria require only that car companies have to cut emissions; they do not have to specify a certain amount. “It is not made clear whether this criteria is merely desirable or a necessary condition in the context of the other criteria,” it says.
John Sauven, executive director of Greenpeace, said the report was proof that “Gordon Brown’s high-flying green rhetoric” had not translated into action.
Experts are divided as to how much of Mr Brown’s stimulus package is genuinely green. HSBC, for example, has estimated that the environmental measures account for a rather larger proportion: 7 per cent of the total.
Even so, the bank’s researchers have pointed out that this is still lower than the equivalent figure elsewhere: 12 per cent in the US, 80 per cent in South Korea and 13 per cent in Germany.
“The environmental content of the UK’s overall economic stimulus package is poor compared to many other countries,” said the NEF.
Copyright The Financial Times Limited 2009