The Perils of Prudence

by Dunstan Hope

New Ground 60
Winter 2000

Floods, fuel shortages and washed-out railway tracks failed to daunt the chancellor's heroine and Gordon Brown missed the perfect opportunity to promote green policies in the pre-Budget report. However, we must do more than just complain, says Dunstan Hope. We need to understand the chancellor's priorities and show him how a low-carbon economy can help Labour to achieve many of its long-term economic goals.

As I write this article in November, two great events cause immense disruption to our lives.

Widespread flooding is one, paralysis of our railways the other. Whilst we can't attribute this particular instance of flooding to climate change, it is becoming clear that this sort of extreme weather event can only become more frequent as global warming takes hold.

Coincidentally, this is the same week as one of the most important events in the political calendar, the chancellor's pre-Budget report. Perfect timing, one would have thought, to introduce new measures targeted at those things uppermost in our nation's thoughts.

Gordon Brown has a number of themes that run through all of his statements – productivity, prudence with a purpose, an end to boom and bust and the like. Two of his themes seem particularly pertinent given the perilous state of our country this November: "Invest-ing for the long term" and channelling resources to the “nation's priorities".

Instead, the entire country seems to be waiting for the chancellor's pronouncement on one thing: a cut in fuel duty. Given that such a step would have zero impact on our railways, not to mention a negative impact on climate change, what does this say about “the nation's priorities"? Do we as a nation, at a time of floods and paralysed railways, believe that a few pence off the cost of a litre of fuel is the most important issue facing us today?

If the nation is this short sighted, then surely our politicians can help show the way? But given that the chancellor, egged on by the Tories, managed to cut the duty on climate-warming fuels, what does this say about political leadership in our country?

I am of the opinion that Gordon Brown and the Labour government have actually shown considerable leadership on climate change. Combine the Climate Change Levy, the stance taken at Kyoto, the voluntary target of reducing CO2 emissions 20% and the Climate Change Strategy and you have the world leader in the fight against global warming.

Yet something seems missing. It seems that despite fine words and achievements, the government - more specifically the Treasury - still does not consider the environment to be right at the heart of its economic strategy.

The government hasn't learnt the simple lessons of its own success – still less grasped the opportunities to make further progress. More to the point, the pre-Budget report failed to seize the tremendous political opportunities presented by the floods to boost public understanding of the need to use tax and spend to fight climate change.

Firstly, take Gordon Brown's speech to the Labour Party Conference in September, in which he called for a “great national debate" on our tax and spend priorities. It makes sense for this debate to start with a discussion of the principles that govern our taxation system, and the first of these should be the need to discourage pollution and encourage the use of modern, productive and sustainable technologies.

One of the underlying reasons for the fuel-duty debacle was the failure to explain, prior to the crisis, the environmental case for this principled shift in taxation. The government was severely handicapped by not having made the environmental case for fuel duty more explicit, or a fundamental part of a wider (and popular) tax and spend strategy.

This is what the government must now do. To give credit where it is due, the chancellor did just this in the pre-Budget report and made it clear that environmental objectives were a key part of Prudence's life-long companion, Purpose. Let's hope Purpose continues to be an environmentalist.

Secondly, take one of the ever-present themes of the chancellor's statements, the need for long-term investment. This isn't merely rhetoric or spin but underpins a raft of economic reforms – reducing the tax rate on long term capital gains from 40% to 10%, doubling the public money allocated to investment rather than current expenditure and granting independence to the Bank of England.

Investment to tackle climate change would seem to fit quite naturally – not to mention prudently – into the long-term investment theme. Funds or tax breaks for renewable energy, fuel cells and energy efficiency could all flow seamlessly. Frustratingly, the Treasury has stubbornly resisted such changes.

There's a lesson here too for the green movement. We should view the world from the perspective of the chancellor and write up a list of economic priorities: prudence with a purpose; investment for the long term; productivity; enterprise; economic stability and public services. Then we must identify what it is about the low-carbon economy that would help the chancellor fulfil these economic priorities. Only then could we – playing the role of chancellor – truly place the environment at the heart of economic strategy.

Dunstan Hope co-ordinates SERA's Parliamentary group and is a member of SERA's Executive Committee. He can be contacted at Dunstan.Hope@lineone.net