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With a UK general election just weeks away, the major parties will be pitching their different plans for the next five years. But there is one major policy on which they are almost all united: to reach ‘Net Zero’ emissions by 2050. Indeed, there is such unanimity among politicians and the mainstream media on this issue that there is unlikely to be very much discussion about it at all during the campaign.
Yet achieving this goal would involve not only a transformation in our economic system but a sacrifice of many other objectives which may be equally or more important to the electorate. The UK is running a unsustainable fiscal deficit of more than 6% of GDP. All parties promise to spend more health care, housing, education, infrastructure, defence, etc, while also promising to freeze or reduce the tax burden. Alongside such promises, realistic estimates of the costs of adopting Net Zero, not just for the UK but for Europe and the USA, start at 5% of GDP for the next 25 years and may be as high as 10% of GDP.
There is no prospect of financing such expenditures by borrowing. Cutting other public and private investment will accelerate the recent decline in the country’s capital stock and GDP per head. Raising taxes is both politically difficult and counter-productive for economic growth. Within such tight fiscal and macroeconomic constraints the money to pay for Net Zero must come either by reducing other public spending or by a drastic squeeze on private consumption.
The failure to discuss such choices openly raises questions about whether a future government will have the authority and public consent to impose the sacrifices required by Net Zero. Or will the result be evasion and a rapid loss of trust in and public support for the new government?
SPEAKER
Professor Gordon Hughes
Former adviser to the World Bank and professor of economics at the University of Edinburgh.
READING
Financing the energy transition: Do the numbers add up?, Professor Gordon Hughes, Global Warming Policy Foundation, March 2024
Can the UK afford Net Zero?, Gordon Hughes, Cloud Wisdom, 28 June 2024 (text version of Professor Hughes’s talk)
