Letter to the Chancellor ahead of the Spring Statement

28 February 2022

Dear Chancellor,

This is the first budget since the UK-hosted COP26 Summit in Glasgow and the formation of the Glasgow Climate Pact, which reaffirmed the world’s ambition to limit global heating to 1.5 degrees.

It was concerning that in the Autumn Budget and Spending Review, just days ahead of COP26, there was not a single reference to climate or nature and research by the WWF revealed that it included £55bn worth of investment in high-carbon projects. It is imperative, therefore, that this Budget Statement delivers an urgent upscaling of investment to address the climate crisis.

In particular, the Government must take note of the warning from the International Energy Agency that there can be “no investment in new fossil fuel supply projects” if the world is to achieve net zero by 2050.

Furthermore, in the context of both increasing global gas prices and a cost of living crisis, with the Bank of England warning of a significant fall in living standards, we need spending decisions designed to reduce our dependence on fossil fuels. As a priority, the Government must invest in a comprehensive energy efficiency programme, whilst ending its support for fossil fuels and delivering a just transition for workers.

When you deliver your Spring Statement next month, we trust you will show climate leadership by signalling an end to the fossil fuel era and by delivering an economy that will enable us to reclaim our future.

1.       Invest in long-term solutions to the gas crisis

The unprecedented increase in global gas prices has led to a 54% increase in the energy price cap, meaning that fuel bills are set to rise to £2000 in April. This increase is insurmountable for many families, with National Energy Action warning that the number of households in fuel poverty will increase to 6.5 million when prices rise . Although your Government has already announced some measures to support struggling households, it is concerning that no new funding was announced for  energy efficiency, to reduce fuel poverty as well as the UK’s reliance on gas.

In the Spring Statement, we look forward to investment in a nationwide green home retrofit scheme, to deliver, at the very least, on the 2019 Conservative Manifesto pledge for £9.2 billion in energy efficiency. A significant multi-year investment to retrofit the UK’s homes could create 500,000 direct and indirect jobs and should be coupled with accelerated investment in renewables to improve the UK’s energy security.

To help fund further protection for consumers from energy price increases and accelerate the transition to a zero emission economy, we are calling on you to also announce a dirty profits tax on North Sea oil and gas producers, namely an increase in the Supplementary Tax from its current level of 10% to 35%.

2.       Bring fossil fuel legislation up to date

Despite the overwhelming evidence that limiting global heating to 1.5 degrees requires “rapid, deep and sustained reductions in global greenhouse gas emissions”, the OGA Strategy which came into force on 11th February 2021 retains the duty to maximise the economic recovery of petroleum at its core.  This duty is at odds with the scientific and political consensus, including the latest IPCC report, which the UN Secretary General said must “sound a death knell” for fossil fuels.

Furthermore, the Energy Minister has acknowledged that “the Coal Authority’s statutory duty to promote an economically viable coal industry, as set out in the Coal Industry Act 1994, is at odds with our climate leadership ambitions and policies on coal”.

The Spring Statement is an opportunity to put in place funding for a 1.5 degrees compatible energy transition, including support for a just transition for oil, gas and coal sector workers.

We hope you will also recognise the importance of UK legislation being updated to replace the duty to maximise the economic recovery of petroleum in UK waters with a duty to manage the decline of the oil and gas sector. Similarly, the duty to promote an economically viable coal industry should be replaced with a duty to manage the sector’s decline and support a just transition for workers.

3.       End the tax system’s support for fossil fuel industry

The UK has one of the most generous tax regimes in the world for oil and gas production, due to tax reliefs for exploration and decommissioning costs. In total, between 2016 and 2020 tax reliefs for oil and gas companies came at a cost to the public purse of £9.9 billion for new exploration and £3.7 billion in for decommissioning costs. Furthermore, the UK received less than $2 per barrel of oil in tax in 2019, in comparison to nearly $22 per barrel in Norway.

We call on you to use the Spring Statement to urgently end all tax reliefs, financial support and other subsidies for the fossil fuel industry, in line with the World Trade Organization definition of subsidies.

4.       Support a just transition for oil and gas workers

In recent weeks, Ministers have emphasised the need to support oil and gas workers, particularly in the context of rising global gas prices and shifting to a zero-carbon economy. Research published in 2020 by Friends of the Earth Scotland, Platform and Greenpeace shone a light on the experiences of offshore oil and gas workers and revealed a high level of concern about job security and working conditions. Yet it also showed a significant appetite to be a part of the transition to a zero-carbon economy, with over 80% of surveyed workers saying they would consider moving to a job outside of the oil and gas industry – and over half choosing to transition into renewables and offshore wind if they had the opportunity to retrain.

The North Sea Transition Deal failed to provide any meaningful support for workers to transition into renewables, either in terms of investment or policy, and didn’t create a budget for retraining. In the Spring Statement, we are calling on you to fund a retraining guarantee for existing oil and gas workers, as well as those who have recently left the sector.

5.       Build an economy fit for the future

Finally, this Statement should mark a turning point towards new measures of economic progress, breaking the UK’s addiction to endless economic growth and instead focussing on the health and wellbeing of individuals, communities and the environment. The Treasury-commissioned Dasgupta Review calls for an “urgent and transformative change in how we think, act and measure economic success to protect and enhance our prosperity and the natural world”. Likewise, the Environmental Audit Committee report on Biodiversity in the UK called for alternatives to GDP to “more appropriate ways to measure economic success”.

When you stand up in the House of Commons to deliver your statement, as well as reporting on the OBR’s updated economic and fiscal forecast, we call on you to report on the economic, social, environmental indicators that determine whether people can live healthy and fulfilled lives.  This could follow the lead of New Zealand, home to the world’s first ever Wellbeing Budget and a finance ministry that uses a Living Standards Framework  to shape all economic policy making. 

I urge you to consider these proposals in full ahead of the Spring Statement.

Yours sincerely,

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