16 August 2022

As Thatcher knew, we can combine sound money with sound action on climate change

By Stephen Hammond MP

Margaret Thatcher was not just one of our greatest Prime Ministers, but one of our greatest environmentalists. She was certainly ‘not all about some expensive, politically correct, green act of bunny hugging’ (to quote the out-going Prime Minister). She was someone who understood the moral ‘conservative’ imperative of protecting the environment for future generations. And that you could combine sound money with sound action to tackle climate change.

Indeed, speaking to the UN General Assembly in 1989 she said ‘the environmental challenge which confronts the whole world demands an equivalent response from the whole world’. In that speech she listed a number of policies outlining how the UK intended to tacking the issue from developing new technology to clean up the environment, looking at ‘growing non-fossil fuel energy and promoting energy efficiency’.

Fast-forward 33 years and many similarities exist in terms of the road to decarbonisation. However, this is now twinned with a wider geopolitical and economic challenge of dealing with fossil fuels becoming increasingly expensive, only in part driven by Russia’s invasion of Ukraine.

I am relieved that, for all the attacks in the current Conservative leadership campaign, the remaining candidates have been clear that they support the 2050 net zero target. The only exception I’ve seen has been from certain commentators sniping from the side lines suggesting that net zero is a bad ‘unconservative’ policy, even though all they offer as an explanation is that it is stopping us from cutting levies on bills. You could, and possibly should, remove the so-called ‘green levies’ from energy bills and move them into general taxation, but having a net zero policy does not preclude this.

There is a Conservative way forward which both embraces our responsibility to cut carbon emissions and recognise the imperative of growing the economy. Indeed, the Climate Change Committee is now predicting, in its most recent progress report, a small positive benefit to the UK economy from the transition to net zero.

Some good policies have been brought forward already, such as removing VAT on energy efficacy products or bringing forward the super-deduction which can help manufacturers invest in greener equipment. Tax-cutting with a green purpose.

There is more that could be done, investing in measures which will pay back, not simply throw money away. The cost of living package recently announced will be of huge relief to many, particularly the most vulnerable. The cost of gas is soaring and now expected to add £2000 to the average fuel bill this winter. The Government having to expend £15bn a year to effectively subsidise energy bills is unsustainable, particularly as most experts expect the gas price to remain high for years to come.

Instead, looking at how we can reduce our reliance on gas through ‘growing non-fossil fuel energy and promoting energy efficiency’ is how we can get energy costs under control.

The Energy Company Obligation (ECO) is perhaps the most successful energy efficiency scheme in the UK. Those in fuel-poor households who qualify for the scheme are expected to be saving £600 on their energy bill.

It’s not just energy demand, but also energy supply where we can see an investment-driven response. Wind energy is by far the cheapest form of generation and is helping keep electricity bills lower than they would otherwise be. Offering tax breaks for investment in renewables makes sense. We know offshore wind to be the cheapest form of generation. Indeed, offshore wind farms which have been financed through Contracts for Difference (CfDs) are no longer taking money but paying it in as the cost to generate electricity is so much lower than the wholesale cost. Using mechanisms like the super-deduction to incentivise investment in offshore wind and other renewable sources from existing energy companies will help them transition.

It’s not just at home, but abroad too. One thing both Boris Johnson and Margaret Thatcher had in common was seeking to be climate leaders on the world stage. As a result of Brexit, we now have our own independent trade policy, which could possibly provide us with more leverage when expecting high standards from other countries. In particular, when it comes to dealing with China, looking at a carbon border adjustment would enable a more equitable trading relationship enabling UK goods, with lower carbon footprints to be more competitive.

From Burke to Smith to Scruton to Thatcher, environmental stewardship has been a thread which has run through the Conservative tradition. Now in the modern age, we can embrace the net zero transition and recognise the necessity to grow our economy.

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Stephen Hammond is Conservative MP for Wimbledon.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.