‘Close to Useless in Every Way’The Government is Pursuing Economic and Climate Disaster
Thomas Perrett reviews Rishi Sunak’s Spring Statement and how it affects the UK’s climate change commitments
The Chancellor has cut fuel duty by 5p per litre, a policy which he described in his Spring Statement as “the biggest cut to all fuel duty rates ever”. A centrepiece in his address – which Rishi Sunak referred to as a “principled approach to cutting taxes” – the fuel duty cut is a response to rising oil prices caused partly by Russia’s invasion of Ukraine.
The Chancellor’s decision is intended to alleviate the cost of living crisis, as soaring energy prices and rising inflation threaten to significantly reduce living standards.
Figures from the Office for Budget Responsibility (OBR) paint a gloomy picture. The Government spending forecaster has stated that, when adjusted for inflation, disposable household incomes are set to fall by 2.2% this year – the biggest drop in a financial year since records began in 1956.
Yet, the fuel duty cut has drawn widespread criticism from environmental campaigners and prominent opposition politicians, who have argued that the measure is not only insufficient to address the scale of the cost of living crisis, but is illustrative of the Government’s failure to commit to its net zero pledges.
Indeed, Douglas Parr, policy director at Greenpeace UK, told the Independent: “A fuel duty cut gives more money back to the driver of an expensive gas-guzzling SUV than the average punter.”
Moreover, the measure incentivises motorists to continue using petrol and diesel vehicles. Following the Government’s decision to slash electric car subsidies by 40% at the end of last year, electric vehicles remain firmly out of the average consumer’s reach. This may cause an upsurge in air pollution, before the proposed ban on the sale of new petrol cars takes effect in 2030.
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‘This Year is Set to be Disastrous’
Rishi Sunak’s Spring Statement reflects the Government’s hostility towards the sweeping, structural reforms required to meet its legal climate obligations. Back in April, the Government enshrined into law a target to cut emissions by 78% compared to 1990 levels by 2035.
Taxing major oil and gas firms such as Shell and BP – which have made £40 billion worth of profits in the last year alone – is a far more popular, substantive policy than slashing fuel duty. Fuel taxes have, in real terms, been cut since 2011 through successive price freezes, which have led to an estimated 5% increase in emissions.
Labour’s Shadow Chancellor Rachel Reeves has accused Sunak of “making the cost of living crisis worse, not better” through the fuel tax cut, arguing that the Chancellor “could have introduced a windfall tax on oil and gas companies” and “set out a proper plan to support businesses and create jobs”.
Recent polling by Savanta ComRes has shown not only that 76% of 2,203 surveyed voters support a windfall tax on North Sea oil firms, but that the Chancellor is out of step with his own base, with 81% of Conservative voters also backing such a tax.
James Meadway, director of the Progressive Economy Forum think tank, told Byline Times that the fuel duty cut is as “close to useless in every way”, arguing that it would “disproportionately benefit richer motorists, but not for very long, as they have pushed prices back to what they were about a week ago, at a cost of £5 billion”.
Meadway also argued that the Spring Statement could create a political backlash among voters likely to be hit harder by rising inflation and energy bills, arguing that “for anyone switching to the Tories in 2019, the party has just revealed itself to live up to the stereotype: arrogant, callous, ignorant of how most people live their lives”.
“The scale of the cost of living crisis hasn’t really sunk in yet, but this year is set to be disastrous – particularly for those on lower incomes,” he added.
According to the New Economics Foundation, only 7% of the savings accrued from the fuel duty cut will go to the bottom fifth of British society, while 33% will go to the top fifth.
The Government has also refused to commit to substantive measures which, in addition to addressing the climate crisis, would reduce energy dependence on Russia – such as accelerating the development of renewable energy sources and low carbon home insulation.
The think tank E3G has found that improving energy efficiency measures within homes could reduce Russian gas imports by 80%, a measure which if combined with the rapid deployment of renewable technologies, could render Russian energy supplies obsolete as early as 2022. The fuel tax cut, by contrast, only ensures further dependence on Russia, which supplies an estimated 13% of UK diesel.
‘From Dictator to Dictator’
The Spring Statement is the latest in a series of Government proposals that have sought to minimise energy imports from Russia by seeking to boost domestic and foreign fossil fuel supply.
The Government’s energy strategy has directly contravened the warnings of prestigious global watchdog the International Energy Agency, which concluded in a May 2019 report that “there are no new oil and gas fields approved for development in our pathway” and that, in order to achieve decarbonisation by 2050, “no new coal mines or mine extensions” could be approved.
In the wake of Russia’s invasion of Ukraine, the Prime Minister promised Scottish Conservatives in Aberdeen that his Government would make “sensible use of this country’s own natural hydrocarbon resources”, arguing that divesting from fossil fuel energy sources in the North Sea would risk “exposing the UK to continued blackmail from Vladimir Putin”.
Yet, prominent domestic oil firms have been directly linked to Russia in recent years; BP recently abandoned its stakes in Russian oil giant Rosneft, which comprised approximately 50% of the company’s oil and gas reserves, in a decision which could cost the firm $25 billion.
Johnson has been criticised for not only attempting to expand domestic fossil fuel energy, but for “going cap in hand from dictator to dictator”, in the words of Labour Leader Keir Starmer, referencing Johnson’s attempts to persuade the Saudi Arabian regime to boost energy production to Britain and the West.
The Government has largely avoided taking the necessary steps to implement an environmental strategy that invests in domestic energy sources, according to Meadway.
“The big wins for the UK in moving towards meeting its climate obligations are in rapidly expanding onshore wind generation, and insulating every home in the country properly,” he told Byline Times.
Indeed, the cost of solar PV modules has declined by 99.6% since 1976. Both solar and wind power are far more cost-effective than natural gas, and can be deployed at scale far more efficiently.
Rishi Sunak’s fuel duty cut is a meagre policy that will do little to address the cost of living crisis, while threatening to significantly weaken the Government’s strategy for decarbonising the economy. With an inflation crisis around the corner, and the energy price cap set to rise later in the year, the Government’s policies may soon result in an economic and electoral backlash.