The Rt Hon Rishi Sunak MP  

Chancellor of the Exchequer  

Date: 22 October 2021

Dear Chancellor,

Five tests for 1.5 degrees: a Spending Review for climate and nature

For the Spending Review to live up to the Treasury’s ambition to “deliver the people’s priorities” over the next three years, we need to see rapid, far-reaching, and unprecedented action on the climate and nature emergencies. Earlier this month, the largest ever UK analysis showed that the public want climate action that goes faster and further than Government policy. It reveals widespread support for taxation and spending changes that would slash carbon emissions, create millions of jobs, and improve the financial situation of people on lower incomes.

Moreover, with the UK welcoming the world to the UN climate summit just days later, the Budget and Spending Review will show whether the Government is serious about its own COP26 climate goal to “keep 1.5 degrees within reach”. Next week will also demonstrate whether the Treasury is acting on the IPCC’s  warning that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach”. 

Whilst some recent Budgets and Spending Reviews have paid lip service to climate and nature, they have largely continued with economics as usual: incentivising or failing to halt the destruction of the environment upon which we all depend. This Wednesday, we need to see the Treasury change direction, by meeting the following five tests for keeping 1.5 degrees alive and giving nature the priority it deserves.

1. A climate and nature test

Now is the moment for the Treasury to adopt a comprehensive climate and nature test, to ensure all taxation and spending measures can be assessed for their impact on the UK’s climate and nature goals. As well as highlighting and quantifying environmentally beneficial measures, such a test would serve as a tool to identify, and then eliminate, taxation and spending decisions that undermine progress, and would help ensure coherence across departmental policies.

Analysis from WWF found that climate change mitigation measures in the March 2021 Budget added up to just 0.01% of GDP, well below the 1% the Climate Change Committee consider is needed to achieve our climate targets. The climate and nature test would also shine a spotlight on whether investment is adequate, by incorporating an overall emissions assessment tool to provide an estimate of the total impact of Budgets and Spending Reviews. This would help the public and parliamentarians  accurately assess the Treasury’s competency regarding the climate and nature crises.

2. Go big like Biden

The Treasury should match the scale and ambition of US President Biden’s proposed £3,000 per person investment in a green recovery - just £270 per person has been promised so far in the UK. This means dramatically scaling up investment in climate and nature, to at least an additional £30bn per year as proposed by the IPPR Environmental Justice Commission. This would transform the UK’s outdated infrastructure, making our homes warmer, our bills cheaper, breaking our dangerous dependence on gas, nurturing climate-friendly farming, supporting affordable, reliable public transport, making our air cleaner and our towns, cities and villages better places to live - creating millions of good green jobs in the process. Proposals for this sort of transformative Green New Deal in the UK and globally are ready and waiting. The Spending Review must be about investing for the long term, not backsliding into austerity.

Buildings account for 17% of the UK’s greenhouse gas emissions, so making the UK’s 29 million leaky homes fit for the future is essential if the UK is to achieve its climate targets. However, the Heat and Buildings Strategy fell far short of the ambition needed, with just £3.9bn of new funding, including £5,000 grants for heat pumps and very little for energy efficiency. The Treasury should therefore increase this to a 12bn over the remaining course of this parliament, to insulate homes and kick start the transition to low carbon heating. This level of investment would help to create thousands of good green jobs and new polling shows that 77% of the public are in favour of financial support to help families retrofit their homes.

3. End the fossil fuel era

The IEA has shown there can be no new investment in fossil fuels if we are to meet our climate targets. The UN Secretary General says the IPCC’s latest report must “sound a death knell” for fossil fuels. The Treasury needs to take responsibility for ending our deadly addiction to fossil fuels, and cut off all spending and incentives that continue to fuel the fires of the climate crisis.

This means that the Spending Review and Budget need to: cancel plans for the Cambo oil field - the first phase of which would produce carbon emissions equivalent to running 18 coal power stations for a year; remove the duty to “maximise economic recovery” of UK oil and gas from the statute book; and redirect all support for fossil fuels into a just transition for oil and gas workers in the North Sea. It is particularly disappointing that the Net Zero Strategy fails to rule out new oil and gas licences in the North Sea.

Globally, the fossil fuel industry receives subsidies of $11m a minute. By walking the talk, as host of COP26, the UK could play an important leadership role: catalysing international action to end all subsidies for oil, coal and gas, whilst also building support for a new Fossil Fuel Non-Proliferation Treaty. 

4. A fair share of climate finance

The UK has a responsibility to ensure that rich countries fulfil the 10 year old climate finance pledge made in Copenhagen, which according to the OECD’s figures released last month was $20bn short in 2019 and it was very likely that the $100bn target for 2020 was also missed. This longstanding commitment must be delivered in full. We cannot do this whilst our own climate finance comes from an aid budget which is being slashed by £4bn a year, with some of the world’s most climate vulnerable countries bearing the brunt – ODA to Bangladesh, for example, has been cut by over £100m. 

The UK should immediately restore the aid budget to 0.7% GNI, ensure that climate finance is genuinely ‘new and additional’ to ODA, and that it also pays its fair share. ODI estimate that the UK’s increased climate finance commitment still only accounts for 71% of our fair share. The Spending Review must increase climate finance to £4.3bn a year of new funding, additional to existing sources, and guarantee that the UK channelling of IMF Special Drawing Rights allocation to help low-income countries recovering from the coronavirus pandemic will be additional to existing ODA and climate finance commitments.

5. Shift to a Wellbeing Economy

The Prime Minister is right: the UK’s economic model is broken. The relentless pursuit of infinite economic growth on a finite planet is fuelling the climate and nature crises and worsening inequality. As the Treasury-commissioned Dasgupta Review of the Economics of Biodiversity recommends, we need “urgent and transformative change in how we think, act and measure economic success to protect and enhance our prosperity and the natural world.”

The Spending Review should commit the UK to adopting beyond-GDP indicators, to measure economic progress in terms of the wellbeing of people and planet and to facilitate the transition to a wellbeing economy.  As Chancellor, you could set a date for the UK’s first ever Wellbeing Budget and collaborate with finance ministries in New Zealand and other nations in the Wellbeing Economy Governments partnership who are already realising the benefits of going beyond growth.

Shifting to a wellbeing economy also aligns with the Government’s stated desire for the Spending Review to deliver on the people’s priorities. 66% of UK adults want health and wellbeing to be a higher priority than GDP growth. The UK should be leading the world towards a wellbeing economy - via domestic policy and on the global stage as host of COP26.

If the Budget and Spending Review meet these five tests, the Treasury would demonstrate that  it understands the scale and scope of the climate and nature crises, and that it is ready to play its part in building better lives for us all, by steering the country away from climate breakdown and towards a greener, kinder and fairer future.

Yours sincerely,

Caroline Lucas MP, Chair All Party Parliamentary Climate Change Group and Chair APPG on the Green New Deal

Clive Lewis MP, Co-Chair, APPG on the Green New Deal

Ben Lake, Chair, APPG on Fuel Poverty

Baroness Young, Vice Chair, APPG on the Environment

Baroness Tyler, Vice Chair, APPG on Limits to Growth 

Wera Hobhouse MP, Vice Chair, APPG on the Green New Deal

Debbie Abrahams MP, Vice Chair APPG on the Green New Deal