The future of the UK’s green industrial strategy

Would it be Aberdeen or Hull? The answer turned out to be Oxfordshire. The last-minute location changes for the recent government energy announcement feels indicative of the internal tangle over the 2500 pages of documents that were published recently, outlining the Government’s plans for “Powering Up Britain”.

Reported pushback from Chancellor Jeremy Hunt and the Treasury over the last few days scaled back the fiscal ambition of the plans, with Hunt’s free-market and private capital-led approach being outlined in an op-ed in the Times. There can be no doubts over Hunt’s influence, as he argues that the UK approach should be based on “not massively distortive subsidies, but fantastic science, innovation-rich companies, and a pro-growth regulatory regime.” The delivery of this approach is underpinned by an update to the Government Green Finance Strategy, which includes plans to grow green private investment across all parts of the UK economy.

The batch of announcements includes positive news, particularly on carbon capture and renewable energy generation. Yet many across the clean energy and hydrogen sector were left underwhelmed by the announcements. It’s a sign of progress that we can be left underwhelmed by what would have been almost unthinkable 10 or more years ago, but within the context of the US Inflation Reduction Act, the much-touted measures feel modest. Chancellor Hunt has pledged further announcements during his Autumn fiscal statement, but what is clear in the government’s announcements and approach is that they want the green transition to be guided by private investment.

Meanwhile, Shadow Climate Change and Net Zero Secretary Ed Miliband pre-empted this set of announcements with his own speech, calling for the government to match the Inflation Reduction Act with funding and policy proposals. Miliband praised President Biden’s initiative, calling it “a modern green industrial policy at work” and the policies of “an active state deploying public investment to catalyse private investment.” Mr Miliband laid out the Labour Party’s intentions to deliver a British version of the Inflation Reduction Act. In his speech, he built on the view outlined at Labour’s Party Conference in September that net zero is a massive economic opportunity for Britain and warned that this could easily slip from the UK’s grasp without the right government intervention and support.

This divergence in industrial strategy is familiar. The question of government fiscal intervention has always been a major battleground between the Tories and Labour, and this week shows this old debate now exists within the new paradigm of net zero. Where public opinion decides to fall could have extraordinary implications. The green growth agenda will sit at the heart of both parties’ manifestos, laying the groundwork for one of the most crucial election issues in 2024.

Labour has a great deal of faith in their flagship policy of GB Energy, with Ed Miliband describing it as a “vote winner” on the doorstep, and this faith may be well-placed: research conducted in September showed 72% of all voters – and 72% of Conservative voters – support the idea of a state-owned energy company. The tempered reaction to the Government’s announcements suggests that there is still some work to do in fleshing out a vision which can compete on the green economy, and we expect to see that over the course of the year.

This year, both parties must nail down their green industrial policies, hashing out the details of what they would do upon entering government. What will be equally important is how these competing policies are translated into a vision that can be presented to voters.

Shaping that vision must, therefore, be a key part of net-zero focussed businesses’ objectives over the coming months. Those who can persuade the Chancellor and Energy Secretary to move more quickly, on relevant funding, legislation and regulation, and those who can shape the Labour party’s increasingly differentiated policy positions, stand to gain the most.

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