Press Releases

Evidence from Greening UK Export Finance, submitted by Bright Blue, the independent think tank for liberal conservatism, has been published by the Environmental Audit Committee as part of their investigation into the financial sector and the UK’s net zero transition.

The submission is available here.

Bright Blue, the independent think tank for liberal conservatism, has today published a new report entitled A carbonless crucible? Forging a UK steel industry, which examines how the UK’s steel industry can be revived and a thriving market for ‘clean steel’ developed.

With the UK Government extending current steel import tariffs and a new Conservative Prime Minister soon to be appointed, Bright Blue’s latest report explores and explains the pathways, policies, challenges and objectives for the development of ‘clean steel’ in the UK. We conclude by offering original and credible policy recommendations for deepening the decarbonisation of UK steel in the years ahead.

The challenge of decarbonising steel is particularly urgent: in 2019, the steel sector accounted for just over one fifth of carbon dioxide (CO2) emissions from all UK industries. The Climate Change Committee (CCC) has recommended emissions from the production of iron and steel in the UK fall to near zero by the mid 2030s. However, there is so far no specific commitment from the government to delivering ‘clean steel’ within a clearly defined timeframe.

Bright Blue’s report identifies five objectives to cultivate an internationally leading ‘clean steel’ industry:

1. Ensure steelmakers have access to suitable quantities of affordable low-carbon electricity
2. Make hydrogen available and affordable to steelmakers in sufficient quantities to enable clean steel production in the 2030s
3. Establish a policy framework to overcome investment barriers to producing clean steel
4. Enable access to suitable raw materials, such as scrap steel
5. Develop a market for ‘clean steel’ products, backed by appropriate regulations

A carbonless crucible is published alongside a new report from the think tank Green Alliance, both in partnership with LIBERTY Steel Group. This report is the outcome of a policy partnership between the two organisations which began at COP26 in Glasgow and aims to develop policies required to create a sustainable future for UK steelmaking.

Wilf Lytton, Associate Fellow at Bright Blue, commented:

“We are used to hearing stories of the demise of steelmaking in the UK. But the reality is that steelmakers, and the industries that rely on them, have rarely been more critical to securing the UK’s place in the world than is the case today. 

“With ongoing global trade tensions, supply disruptions related to the war in Ukraine, and the need to cut greenhouse gas emissions, both the Government and the steel industry now face many common challenges ahead, from net zero to national security.

“Recent efforts to safeguard the UK’s steel industry from high energy costs and trade pressures have shown a willingness on the part of the UK Government to address the immediate issues facing the sector. 

“However, a longer-term plan of action is now needed to bridge the gap to clean steel. We urgently need policies for developing new markets for clean steel, enabling steelmakers to get on with the task of developing innovative clean steel technologies and scaling them up to meet the UK’s emissions targets.”

Ryan Shorthouse, Chief Executive of Bright Blue, commented:

“With Boris gone, the Conservatives need something new to sustain the support of Red Wall voters. Bold policies to revive the steel industry to make it clean and competitive would be a good start.

“Steelmakers are a critical part of the UK economy, but they have faced significant challenges in recent years, especially higher energy prices and global trade distortions. With the right policies and investment, however, the UK can have a world-leading clean steel industry.

“Technological readiness is no longer a significant barrier to the deep decarbonisation of primary and secondary steelmaking in the UK. Instead, steelmakers need the support and confidence to invest in new technological approaches and develop clean steel business models.

“Despite the UK Government’s recent efforts to support the decarbonisation of the steel industry, existing and insufficient public policy is still one of the key challenges that is holding back private investment in UK clean steel.”

Jamie Wallis MP, Member of the Welsh Affairs Committee, commented: 

“I welcome Bright Blue’s latest research into Britain’s steel industry and support the report’s principles to ensure the industry can decarbonise successfully, and thrive in the long-term.

“I am also pleased to see that the role technologies can play in supporting steelmakers, such as the importance of hydrogen, is a key focus throughout the report in both the analysis and the recommendations. 

“The steel industry has a rich history in the UK, providing stable and well-paid jobs in Wales and for my constituents of Bridgend. A strong and clean steel industry can be a vital part of the Government’s Levelling Up agenda and I am glad Bright Blue today has released this timely and important report that can help achieve this.

“Whoever is the next PM, we must ensure a thriving and well-supported steel industry in order to retain the Red Wall.”

The report proposes 7 original and credible policies to support the development of a ‘clean steel’ market in the UK.

Recommendation one: Extend the EII Compensation Scheme until 2030, with the level of compensation reviewed annually

The UK Government recently renewed the EII Compensation scheme which provides relief to steelmakers from indirect carbon costs in the electricity they use which are set to last until 2025. However, it is likely that the scheme will be required on a longer-term basis, not least because French and German steelmakers are expected to benefit from equivalent exemptions indefinitely. 

We propose the Government extend the scheme until at least 2030 to provide a longer-term signal to steelmakers that reduces uncertainty around the level of compensation available after 2025. The change is expected to be revenue-neutral for government since the current scheme would likely be extended anyway.

The level of compensation provided by the scheme should, however, be reviewed annually by government in line with the latest available evidence. Recommendations to the Secretary of State at the Department of Business, Energy and Industrial Strategy on whether to retain or adjust the level of compensation should also be made public.

Recommendation two: Introduce mandatory carbon footprint requirements for Contracts for Difference (CfD) from 2024 and Capacity Market (CM) contracts from 2025, raised in each round until 2035 when embedded carbon content should be net zero

In the power sector, the UK’s Contracts for Difference (CfD) and Capacity Market (CM) mechanisms represent a major source of government-administered funding to support investments in low-carbon power generation and marginal capacity, respectively.

Government is responsible for setting the rules that participants bidding for both CfD and CM contracts must adhere to, which already includes emissions performance standards for fossil power generation. A similar approach should be taken to setting standards for the embodied carbon of generation assets contracted through these schemes.

We propose minimum requirements for the carbon content of materials used in contracted projects or by setting upper limits for embodied carbon emissions on a per kWh contracted basis. These requirements could be used for materials in the construction of electricity generation assets (including renewables, nuclear, dispatchable power, storage and flexibility), starting with the 2025 T-4 auction for CM applications, and with the sixth allocation round (AR6) for CfDs in March 2024. These new requirements should be set in line with the Government’s net zero target for the power sector, and raised at each round such that newly contracted capacity is required to achieve net-zero embodied carbon emissions from 2035 onwards. 

Recommendation three: Introduce new mandatory carbon footprint standards for large construction projects from 2026 that require a certain proportion of construction materials used to be low-carbon, and expand both the scope products covered by the standard and the required proportion of low-carbon materials over time

The construction sector is the largest consumer of steel products in the UK. Publicly funded construction projects account for a significant portion of this demand. 

The UK Government has established guidance on public procurement for construction projects via the Procurement Policy Notice and the Treasury’s Green Book. However, both are advisory and require extensive training and resourcing at central and local government levels to be applied effectively owing to their complexity.

Government should introduce a requirement for large construction projects to incorporate a minimum percentage of certifiable low- and zero-carbon materials. The requirement should apply to the use of specific products in constructions, rather than to the project as a whole. 

The requirement should come into effect from 2026 to allow time for the development of product carbon footprint labelling standards.

The requirement could initially be applied to a selection of widely used and standardised construction products which, for steel, might include reinforcement bar, beams, columns, heavy sections, flat sections, angled sections, and hollow sections. The scope of materials covered by the requirement should be expanded over time to include steel products used outside the construction sector. 

The required percentage of low- and zero carbon products used in projects should also be increased over time in line with the UK Government’s 2050 net zero target.

To promote compliance, a requirement to submit a sustainable procurement plan should be introduced in planning and tender processes for large projects. As part of these procurement plans, project developers would be obliged to demonstrate compliance with the requirement to source a certain percentage of low- or zero-carbon materials.

Recommendation four: Introduce a carbon border adjustment mechanism (CBAM) by or before 2026 whilst phasing out free allocation from the UK Emission Trading Scheme (ETS) for sectors covered by the CBAM

The UK ETS could play an important role in supporting commercial clean steel production, but existing provisions for free allocation undermine the carbon price signal for Energy Intensive Industries (EIIs).

We therefore urge the current Government to establish a UK Carbon Border Adjustment Mechanism (CBAM). To reduce trade barriers, the UK CBAM should broadly align with similar schemes being considered by its trading partners.

The CBAM should initially cover products regulated by the UK ETS that are at risk of carbon leakage and take effect by or before 2026, when the EU plans to introduce its own CBAM. 

To maintain compliance with World Trade Organisation rules, the UK CBAM should form an extension of the UK ETS, with importers required to adopt the same compliance standards as UK manufacturers, and to pay a levy on embodied carbon in their products at a rate pegged to the UK carbon price. 

The introduction of a CBAM should be followed by the rapid phase-out of free allocation in the UK ETS for industries covered by the scheme. As part of ongoing reform of the UK ETS, the Government should, as a minimum, introduce a mechanism through which free allocation can be reduced more rapidly for products covered by a CBAM. This will enable government to generate additional revenues from carbon pricing which can be used to fund policy interventions that support the net zero transition for EIIs.

Recommendation five: Publish a list of priority users for low-carbon hydrogen supplied through the UK’s planned hydrogen networks and ringfence a proportion of low-carbon hydrogen purchase contracts for those sectors

The Government has committed to developing 10GW of low-carbon hydrogen production capacity by 2030. We consider that this will be achieved most effectively through establishing two-way CfDs that allow hydrogen producers and purchasers to competitively bid for long-term government contracts to supply and purchase low-carbon hydrogen, with contracts awarded through a competitive bidding process.

Access to low-carbon hydrogen purchase contracts should be prioritised for certain sectors, taking account for: 

1. How effectively the sector’s use of hydrogen contributes to meeting the Government’s net zero target, measured in terms of emissions savings generated; 
2. The ambition of sectoral emissions targets set by government; and
3. The availability and cost of alternatives to hydrogen for decarbonising the sector

We urge the government to publish a list of sectors that are eligible for priority access to low-carbon hydrogen and to ring fence a proportion of low-carbon hydrogen purchase contracts for those sectors, commensurate with their needs.

Recommendation six: Introduce a cap – reducing over time – on the total weight of scrap metal exports, with the intention of at least halving scrap exports by 2030

High levels of scrap exports are unsustainable in the context of decarbonising the UK’s steel industry.

A cap on total UK scrap exports by weight should be introduced, rather than an export ban – as some have proposed – which might lead to unintended consequences such as scrap metal losing its value. 

The cap should be set at historic average levels initially and reduce over time with the intention of at least halving scrap exports by 2030.

Recommendation seven: Provide total VAT relief on the purchase of low-residual scrap to offset the increased costs of scrap processing

Large quantities of poor condition scrap are produced in the UK in excess of what UK steelmakers require for their own production. Scrap that is in poor condition can, however, be upgraded to low-residual scrap, which has greater value to UK steelmakers, if processed to remove contaminants.

To offset some of the higher costs associated with processing and upgrading scrap metal in the UK, the Government should zero rate VAT on the purchase of low-residual scrap.

ENDS

Notes to editors:

To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Max Anderson at max@brightblue.org.uk or on 07850 684474.

• This report is kindly sponsored by LIBERTY Steel Group. Bright Blue has had complete editorial control over the report. The report does not necessarily reflect the views of our sponsor.
• This report is the outcome of a policy partnership between Bright Blue and Green Alliance which began at COP26 in Glasgow in 2021 and aims to develop policies required to create a sustainable future for UK steelmaking. Green Alliance have published a separate report. Green Alliance does not necessarily endorse the findings of this report.

Commenting on the 2022 Queen’s Speech, Ryan Shorthouse, Chief Executive of Bright Blue, said:

“Boris has one last chance to be bold. The extensive legislative agenda for the coming parliamentary year provides opportunity to introduce transformative policies, especially on improving the affordability and quality of housing, boosting the economic and social infrastructure of so-called left-behind areas, and decarbonising the supply of and demand for energy. 

“But the contents of the legislation will reveal just how ambitious this Conservative Government wants to be. Either it will focus on using its uniquely impressive majority to make lasting and distinctive change to level up and decarbonise this country, or it will squander it through politicking pretending to be policymaking in advance of the next election.”

The Government has adopted the following Bright Blue policies through its 2022-2023 legislation:

• Introducing a flexible lifelong loan entitlement
• Appointing Ofgem as the new regulator for heat networks

Below, Bright Blue has responded to the announcement of legislation that is particularly relevant to our current work. It therefore is not an exhaustive response to the 2022 Queen’s Speech.

Levelling Up and Regeneration Bill

Sam Robinson, Senior Research Fellow at Bright Blue, commented:

“The Government has taken some steps to add meat to the bones of the levelling up agenda, mainly through new targets to reduce regional divides by 2030, and a new accountability ecosystem. But these measures are still not transformational or distinctive enough to create a meaningful legacy. In particular, as well as reform to the planning system, bold tax reforms to address the skewed regional impacts of Council Tax and Business Rates should be a priority.” 

Renters Reform Bill

Anvar Sarygulov, Head of Research at Bright Blue, commented:

“It is good that the Government intends to take significant action to improve the rights of private renters: this bill is long overdue. The abolition of ‘no fault’ evictions will significantly increase the security of private renters, a new ombudsman should increase accountability of landlords, and the extension of the Decent Homes Standard will improve the quality of housing in the sector.”

Social Housing Regulation Bill

Anvar Sarygulov, Head of Research at Bright Blue, commented:

“Strengthening both the rights of social renters, and their enforcement, is a welcome step to improving the standards in the social housing sector. But focusing on quality is not enough: the Government must also go much further on increasing the quantity of social housing to meet the needs of vulnerable low income households who are otherwise forced to rent privately.”

Higher Education Bill 

Ryan Shorthouse, Chief Executive of Bright Blue, commented:

“Flexible lifetime learning loan accounts, as Bright Blue has recommended, would be an effective way of ensuring that people at any point in their working lives are able to access funding for any type of training to upskill or reskill. 

“The details still need finalising, but the entitlement should be generous enough to support the completion of multiple courses above and beyond an undergraduate degree, but limited to the extent that it might cause greater price competition in university fees because students want to bank enough in their accounts for future courses beyond their first degree.

“Setting minimum entry requirements for access to English higher education penalises students and social mobility. This is the wrong approach to ensuring the student finances system is fiscally sustainable. A better approach is to charge a levy on universities that will have a disproportionately high proportion of their graduate cohorts that will have their student loans written off by the government.”

Bill of Rights

Ryan Shorthouse, Chief Executive at Bright Blue, commented: 

“The Government says its plan to introduce a British Bill of Rights to replace provisions in the Human Rights Act will make it easier to deport foreign criminals. But regardless of the Human Rights Act, UK courts have to take into account different international conventions and treaties in judgements. In fact, the Immigration Act 2014 has given guidance to the courts as to where the public interest lies in deportation and immigration cases, and is being enforced by the courts.”

Conversion Therapy Bill

Ryan Shorthouse, Chief Executive of Bright Blue, commented: 

“Initially promised under Theresa May in 2018, a comprehensive ban on the cruel practice of ‘conversion therapy’ for both sexuality and gender identity, across all settings, is long overdue. 

“If the Government made a distinction in legislation and guidance between harmful and bogus conversion therapy, and respected and helpful talking therapy, then consenus ought to be achieved on banning conversion therapy for gender identity.”

Employment Bill

Phoebe Arslanagic-Wakefield, Senior Research Fellow at Bright Blue, commented:

“It’s extremely disappointing that the Government has delayed the Employment Bill for yet another year. This was expected not only to include important new safeguards for those on insecure zero-hours contracts, but also better protections against sexual harassment in the workplace and pregnancy discrimination, as well as a new right to request flexible working from day one.

“Coming in the wake of the P&O scandal which demonstrates the urgent need for this legislation, the Government’s decision to delay the Bill is a missed opportunity to make the UK a better place to work.”

Energy Security Bill

Joshua Marks, Senior Researcher at Bright Blue, commented: 

“It is reassuring that the Energy Security Bill will build on both the Energy Security Strategy released last month and the success of COP26 last year. However, further investment for renewable energy is still needed for projects such as offshore wind in order for the Government to reach its target of 95% low carbon electricity generation by 2030. 

“Additionally, further support for the expansion of the heat pump market and incentivising consumers to switch away from gas boilers will be necessary to reduce our dependence on foreign gas imports and reach net zero by 2050.”

Genetic Technology (Precision Breeding) Bill

Joshua Marks, Senior Researcher at Bright Blue, commented: 

“The Genetic Technology Bill will relax the regulation of gene-edited crops, allowing for their more widespread use across the UK. This will greatly reduce the cost and red tape surrounding gene edited crop testing in the UK, promoting research and development into the technology. Indeed, innovations should not be crippled by excessively tough regulations based on outdated knowledge and misplaced fear. 

“However, care must be taken to ensure consumers are not left in the dark with clear labelling of food which has been gene edited. Public awareness of the differences between gene edited and genetically modified crops is low and work is needed to increase understanding of the public in order for these crops to be financially viable.”

ENDS

To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Max Anderson at max@brightblue.org.uk or on 07850 684 474.

[Image: UK Parliament]

Bright Blue, the independent think tank for liberal conservatism, has today published A vision for tax reform in the 2020s, setting out bold principles and policy ideas for an ambitious agenda of tax reform that tackle the leading economic, social and environmental challenges of the 2020s and beyond.

The Financial Secretary to the Treasury, Lucy Frazer QC MP, will this morning deliver a keynote speech at the launch event for Bright Blue’s new report, which concludes a major two-year project on tax reform influenced by Bright Blue’s high-profile cross-party, cross-sector Tax Commission.

The Government recently launched its Spring Statement Tax Plan, which has been described as the foundations of a future low tax economy. But Bright Blue believes the Chancellor can be and should be much more ambitious with tax reform during this Parliament.

Bright Blue proposes nine key principles that should underpin an ambitious programme of tax reform, supported by policy recommendations to achieve them:

• Supports effort, enterprise, and entrepreneurialism. Tax in the UK is increasingly falling on income from work rather than income from other activities. It should be an urgent priority to better reward people’s effort by reducing taxes on work, especially National Insurance and the Health and Social Care Levy. 

Reducing the rate of the new HSCL and NI more generally, and broadening their scope to include other forms of income, would spread the impact of these taxes more evenly across the income and age distribution, reversing the troublesome shift of overall tax onto workers.

• Fairly taxes income derived from luck, rent-seeking, and externalities. Returns and profits do not always come from productive activities. Sometimes, they can arise from sheer luck, monopoly power or negative externalities. In many ways, the tax system does not adequately tax income derived from these sources. Indeed, if it did, it could lower taxes on effort, enterprise and entrepreneurialism in a more sustainable manner. 

It is difficult to see why returns based merely on good fortune should attract a significantly lower tax rate, as they do in the UK through Capital Gains Tax (CGT). So the Treasury should aim to reduce the gap in headline tax rates between CGT and Income Tax. 

The current design of Inheritance Tax also means that many life-enhancing transfers of wealth go untaxed. The Treasury should replace Inheritance Tax with a Lifetime Receipts Tax. 

• Treat similar activities by individuals and institutions more equally. The current design of the tax system leaves individuals and institutions receiving the same amount of income paying vastly different effective tax rates, significantly distorting the economy. 

Self-employed people pay considerably less in tax than workers, largely thanks to Employers NI, meaning businesses have an incentive to contract labour on a self-employed basis in order to minimise tax liabilities. The Treasury should aim to reduce the tax take between employees and the self-employed, initially by focusing on cutting employers’ NICs 

Many of the largest online retailers are able to take advantage of profit-shifting to other jurisdictions overseas to reduce tax burdens, which gives them a tax advantage over bricks-and-mortar businesses. The UK should be at the forefront of global efforts to respond to profit-shifting and tax multinational enterprises more fairly and robustly. The UK should lobby internationally for the OECD’s proposed agreement on a 15% global minimum corporate tax to use a cash flow base. 

• Incentivises investment to facilitate long-term economic growth. Investment from individuals and businesses is key to building a dynamic, productive and prosperous economy. The Government has recognised the role tax policy can play in spurring business investment through policies such as the ‘super-deduction’. However, the super-deduction is currently set to end in 2023, and the headline Corporation Tax rates are scheduled to rise, meaning that the UK has one of the least generous systems of capital allowances among OECD countries.The Treasury should move to a system of full immediate expensing of capital investment when the super-deduction expires in 2023.

Currently, a lower rate of Capital Gains Tax (CGT) exists to promote individual investment. But CGT chips away at the normal returns to investment by taxing gains arising only from inflation. It is only fair that, if the upsides of investments are rightly taxed more, more is done to mitigate against the potential downsides. So the Treasury ought to introduce inflation indexation, or a similar mechanism, for CGT that ensures the tax does not target ‘paper gains’.

• Ensures sound public finances. Simply borrowing more and more to meet today’s spending demands, and thereby ladening future generations with unsustainable levels of debt, is economically and morally unacceptable. A tax-reforming agenda needs to ensure that, overall, the UK’s fiscal trajectory is sustainable. Three important considerations should guide thinking about tax reform and fiscal sustainability: fixing the UK’s anaemic economic growth, borrowing to invest or cut taxes in the present, and cutting waste by ensuring value for money in both spending and tax reliefs. 

Indeed, the UK Government could develop a consistent model for scrutinising tax reliefs. This could follow the German model, which legally mandates biannual reviews of corporate tax reliefs based on a standard evaluative framework including: target accuracy; cost-effectiveness; necessity; and, sustainability.

• Protects and enhances the livelihoods of the poorest. The escalating cost of living has made life miserable for many of those on the lowest incomes. The Government has taken action to blunt the impact of the new HSCL, but more can and should be done with tax to protect the poorest. 

Council Tax disproportionately hits those in lower-value houses. The Government has introduced a rebate on Council Tax to mitigate against rising energy bills, but this is only a temporary measure. The Government should reform Council Tax to ensure it has an explicit link with today’s house prices. One radical option for doing this is moving to a Proportional Property Tax based on the value of people’s homes.

It is also vital and entirely feasible to pursue a just transition to net zero. That means those on low incomes do not bear burdensome costs. Following other countries such as Sweden, Norway and France, HM Treasury could create a ‘Green Dividend Framework’ for revenue derived from low-carbon economic activity and identify a specific portion of funds from it to be used to reduce the impact of rising prices on low-income households and vulnerable customers.

• Is easier to understand and more difficult to avoid. A needlessly complex tax system is hard to understand, reducing the transparency of taxes and the ability of politicians to explain what tax reforms are achieving. The tax system can be made easier for individuals and institutions to understand by ensuring that the design of taxes is more explicitly linked to their purpose and by simplifying reliefs. 

Some taxes – particularly Inheritance Tax – are relatively easy to avoid: wealthier estates can take advantage of reliefs on Inheritance Tax, or avoid the tax entirely by passing on assets well before death. The Government ought to tighten eligibility for key Inheritance Tax reliefs such as Agricultural Property Relief or Business Property Relief.

• Supports the transition to a net zero economy. Achieving the UK’s legal commitment to net zero emissions by 2050 is the defining and transformative policy goal of this century. The tax system should play a role in supporting the UK’s net zero ambitions. The UK’s current carbon pricing across different economic sectors, however, is inconsistent and insufficient. If anything, certain sectors such as aviation and residential gas use receive a subsidy for carbon emissions.

A standard, economy-wide carbon tax is not feasible. However, the Government should set a target price range for carbon taxes across the whole economy to facilitate consistent carbon prices across different sectors.

• Helps to address regional imbalances, thereby levelling up the country. In some ways the tax system actively holds back progress on levelling up. Council Tax falls disproportionately on properties outside of London and the South East. While the British tax system is progressive overall, Council Tax is one of the only taxes that is outright regressive. Stamp Duty Land Tax also plays a part in slowing progress on levelling up by disincentivising moving home. It is time to replace Council Tax and Stamp Duty with a Proportional Property Tax based on the value of people’s homes.

Manufacturing businesses tend to be highly capital-intensive relative to service businesses, and so would stand to gain the most from better capital allowances and incentives to invest through the tax system. They also tend to be based in areas outside of London and the South-East, particularly contributing to jobs and output in the Midlands and the North. Business Rates, too, have a regional bias. As a result of infrequent revaluations that lag behind economic cycles, firms in areas with rising property prices can be caught out by sudden and substantial increases in their Business Rates liabilities. Conversely, businesses in areas with falling property prices can pay over the odds in Business Rates for years until the next revaluation. 

The Government ought to move to a system of full immediate expensing of capital investment when the super-deduction expires in 2023 and it should ensure that Business Rates do not penalise investments in commercial property. This could be done by adopting a Business Land Tax levied on commercial landowners, based on unimproved land values.

Four previous Bright Blue papers have been published over the past year on different aspects of tax reform: 

• Home truths: options for reforming residential property taxes in England
• Green money: a plan to reform UK carbon pricing‘
• Rightfully rewarded? Reforming taxes on work and wealth
• Energising enterprise: reforming business taxes

Ryan Shorthouse, Chief Executive at Bright Blue, commented:

“Reforms to taxation can be incredibly politically contentious. This causes conservatism in the way HM Treasury approaches tax as a policy lever, meaning it is under-utilised as a tool to help achieve positive, far-reaching change. 

“The Government recently launched its Spring Statement Tax Plan. But we believe the Chancellor can be and should be much more ambitious with tax reform during this Parliament. The Chancellor’s Tax Plan should be added to: to not just always ideologically fixate on lowering taxes, and to also use tax as a tool to help a much wider set of economic, social and environmental goals. Ultimately, we believe that tax can achieve its potential as a substantial policy lever that facilitates bigger and bolder changes to our socioeconomic model than it does at present.”

The members of our Tax Reform Commission included:

• The Rt Hon David Gauke, Former Secretary of State for Justice
• The Rt Hon Sir Vince Cable, Former Secretary of State for Business
• The Rt Hon Lord Willetts, President of the Advisory Council and Intergenerational Centre at the Resolution Foundation
• The Rt Hon Dame Margaret Hodge MP, Former Chair of the Public Accounts Committee 
• The Rt Hon Andrew Mitchell MP, Former Secretary of State for International Development
• James Timpson OBE DL, Chief Executive of the Timpson Group
• Luke Johnson, Entrepreneur and Chairman, Risk Capital Partners
• Emma Jones MBE, Entrepreneur and Founder, Enterprise Nation
• Mike Cherry OBE, National Chairman, Federation of Small Businesses
• Mike Clancy, General Secretary, Prospect trade union
• Victoria Todd, Head of the Low Incomes Tax Reform Group
• Sam Fankhauser, Professor, University of Oxford 
• Christina Marriott, Interim Director of Policy and Advocacy, British Red Cross
• Helen Miller, Deputy Director and Head of the Tax Sector, Institute for Fiscal Studies
• Giles Wilkes, Former Special Adviser, Number 10 Downing Street
• Caron Bradshaw, CEO, Charity Finance Group
• Pesh Framjee, Global Head of Social Purpose and Non Profits, Crowe UK
• Robert Palmer, Director, Tax Justice UK
• The Rt Hon Lord Adebowale CBE, Chair, Social Enterprise UK 

It is important to emphasise that members of the Commission, although influential in the development of the principles and policies, do not necessarily endorse all of them.

ENDS

Notes to editors:

• This report is part of Bright Blue’s project on tax reform, which is kindly supported by the Joffe Trust and Social Enterprise UK. However, Bright Blue retains complete editorial control over the report. The views in the report will not necessarily reflect the views of the sponsor.
• This report concludes the project advised by a high-profile cross-party, cross-sector commission established by Bright Blue to advise on reforms to the tax system in the years ahead to support the post-pandemic economic recovery, the restoration of the public finances, and the achievement of better economic, social, and environmental outcomes. Bright Blue has commissioned independent experts to provide original analysis and policy recommendations in four areas of tax policy: carbon taxation, property taxation, business taxation, and work and wealth taxation. The commissioners do not necessarily endorse the findings of this particular report.

Bright Blue, the independent think tank for liberal conservatism, has today published new polling analysis, entitled Stepping up: public attitudes to addressing the cost of living crisis, which reveals what the UK public thinks about the role of welfare for tackling the cost of living crisis.

Public support for using the benefits system to maintain living standards is very high, and the public believes financially vulnerable groups have become worse off during the pandemic, whereas those on higher incomes have become financially better off. The public is split, however, over whether current support is sufficient for benefit claimants.

The new polling analysis comes after the Spring Statement, in which the Chancellor, Rishi Sunak, decided not to increase the value of benefits such as Universal Credit in line with rising inflation, which will lead to a real terms decrease in the income of claimants. It is part of Bright Blue’s ongoing project on social security after Covid-19. 

Anvar Sarygulov, Senior Research Fellow at Bright Blue, commented:

“While inflation is projected to peak at over 8% later this year, benefits are only being increased by 3.1%, despite the rising costs of fuel, food, and childcare. The additional £500 million for the Household Support Fund is a measly sum that does not come close to addressing the gap between rising costs and the falling value of support.

“The Chancellor needs to stop being allergic to welfare, recognise the effectiveness of the Universal Credit system, and bring forward the next uprating of the benefits from April 2023 for a far more substantive, effective, and targeted intervention.”

The main findings from this analysis are:

• The vast majority of the public thinks that the Government has a key role to play in maintaining standards of living for those on the lowest incomes. 72% of the UK public supports the idea that “benefit payments should be sufficiently high to allow people to pay for their costs of living, such as housing payments, buying essential food and heating their homes” and 67% of the public supports the idea that “it is the Government’s responsibility to ensure that all people have financial support to meet their basic needs”.
• There is a cross-party voter consensus supporting these principles, including among 2019 Conservative voters. 83% of 2019 Labour voters support both statements. Meanwhile, while 2019 Conservative voters are less likely to agree, a majority still express support, with 68% supporting the idea that benefit payments should be sufficiently high to allow people to pay for their costs of living and 55% supporting the idea that the Government is responsible for ensuring people meet their basic needs.
• There is widespread perception among the UK public that the finances of vulnerable groups have become worse off since the start of the Covid-19 pandemic. On whether the following groups have become worse or better off financially (better – worse): low-income working parents (-54%) and those on lower incomes generally (-53%) have the lowest net score among the whole UK population, though those with long-term health problems (-45%) and those who care for them (-43%) are also seen to be significantly worse off than before the pandemic. Those on higher incomes are perceived to have become better off financially (+27).
• There is a cross-party voter consensus that finances of vulnerable groups have become worse off since the start of the Covid-19 pandemic. While 2019 Labour voters are more likely than 2019 Conservative voters to think vulnerable groups have become worse off, with those on lower incomes (-73%) and low-income working parents (-72%) receiving the lowest net scores, 2019 Conservative voters are more likely than not to think that vulnerable groups have become worse off than better off, especially those with long-term mental health problems (-45%), those who care for them (-45%) and low-income working parents (-43%).
• The UK public are divided on whether a ‘typical benefit claimant’ receives sufficient or insufficient support from the Government with their regular expenses. UK adults perceive benefit payments as either less than sufficient or sufficient at roughly equal rates, with a significant proportion also reporting ‘don’t know’.
• The Government support with utility bills is the most likely to be seen as less than sufficient. 43% of the UK public believe that support with utility bills is less than sufficient. Support with housing costs is the most likely to be seen as sufficient (35%).
• For all types of costs polled, 2019 Conservative voters are more likely to see benefit payments as sufficient, while 2019 Labour voters are most likely to see them as insufficient. Both 2019 Conservative (33%) and 2019 Labour (61%) voters are the most likely to see support with utility bills as less than sufficient out of all costs polled, but the large gap shows that 2019 Conservative voters are much less likely to think that the support is less than sufficient.

ENDS

Notes to editors:

To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Joseph Silke at joseph@brightblue.org.uk or on 07948 420 584.

• Bright Blue’s new analysis is entitled Stepping up: public attitudes to addressing the cost of living crisis. This analysis is part of a major Bright Blue project on social security, supported by Lloyds Bank Foundation and Trust for London. Bright Blue retains editorial control of all its outputs.
• The figures, unless otherwise stated, are from Opinium, based on a nationally representative sample of 2,008 UK adults. Within this overall sample, there are unweighted subsets of those who have voted for the Conservatives (672), Labour (494) and Liberal Democrats (178) in the 2019 General Election. The polling was conducted between 28th January 2022 and 3rd February 2022.

Bright Blue, the independent think tank for liberal conservatism, has today published a new report entitled Greening UK Export Finance, which sets out how the UK’s export credit agency (ECA), UK Export Finance (UKEF), can be brought into full alignment with the Paris Agreement and motivate other countries to follow suit.

The report applies an original assessment methodology by Climate Perspectives Group to comprehensively assess the alignment of UKEF with the Paris Agreement. The methodology assesses climate performance of Export Credit Agencies (ECAs) across five weighted dimensions.

ECAs are given one out of four overall labels and an overall score, based on the extent of their alignment: unaligned (score = 0.00/3.00), some progress (score = 1.00/3.00), Paris aligned (score = 2.00/3.00), or transformational (score = 3.00/3.00).

This score is based on five dimensions, which are differently weighted:

1. Transparency. Financial and non-financial disclosures. Weighted 20%. 
2. Mitigation I. Ambition of fossil fuel exclusion or restriction policies. Weighted 40%.
3. Mitigation II. Climate impact of and emission reduction targets for all activities. Weighted 20%. 
4. Climate finance. Positive contribution to the global climate transition. Weighted 10%.
5. Engagement. Outreach and ‘pro-activeness’ of the ECA and its governments.  Weighted 10%.

The report finds in its assessment of UKEF according to the five dimensions:

1. Transparency – 1.25/3.00
2. Mitigation I – 1.33/3.00
3. Mitigation II – 0.67/3.00
4. Climate finance – 0.80/3.00
5. Engagement – 2.33/3.00

Assessment outcome: Some progress (1.23/3.00)

This is most notably due to stopping official export finance support for fossil fuels (coal, oil and gas, with limited exceptions) in overseas businesses in 2021, other commitments made under UKEF’s Climate Change Strategy, as well as the UK’s recent engagement at COP26. 

Compared to other countries, the UK performs relatively well. The four other countries – Canada, Germany, Japan and the Netherlands – assessed by Perspectives Climate Research were all rated ‘Unaligned’ with the Paris Agreement.

Our polling of a reflective sample of 750 UK exporting firms, designed and conducted in partnership with Opinium, found:

• A clear majority of all UK exporters would like for UKEF to be an important force for promoting low-carbon exports globally (73%) and providing more generous financing terms to exporting firms that help to address climate change (73%)
• The majority of all UK exporters support: UKEF assisting exporting firms with preparation for and adaptation to climate-related risks (72%); prioritising job creation within the low-carbon and renewable energy sector over protecting employment in the oil and gas sectors (71%); and, leading among other ECAs on efforts to combat climate change (70%).
• A majority of all UK exporting firms (83%) favour UKEF providing better financing terms for exports of low-carbon goods and services.
• A majority of UK exporting firms (62%) state that UKEF should provide worse financing terms for exports of high-carbon goods and services.

Ryan Shorthouse, Chief Executive of Bright Blue, commented:

“The cost of living crisis, caused by the sharp increase in the global wholesale price of energy and exacerbated by the justified international response to the Russian invasion of Ukraine, shows why the UK and our allies across the developed world must work towards fully phasing out taxpayer support for international fossil fuel projects, and gas in particular, and cultivate green energy markets. 

“As the UK still holds the COP Presidency until COP27 in Egypt later this year, there is an opportunity for the UK to continue to show bold global leadership on climate change by bringing UKEF into full alignment with the Paris Agreement, and encouraging other countries to do the same with their own Export Credit Agencies.”

Igor Shishlov, Senior Consultant for Perspectives Climate Research, commented:

“The latest climate science unequivocally points to the need to leave most of the known fossil fuel reserves in the ground. In this light, export credit agencies as public finance institutions must reflect climate commitments of their governments and fully phase out support to fossil fuels, including natural gas, and ramp up support to renewable energy. 

“The ongoing energy crisis exacerbated by the war in Ukraine clearly demonstrates that the UK must double down on the clean energy transition for the sake of the environment, energy security and employment. The UK must also use its ongoing COP Presidency to rally other countries to follow suit and speed up the alignment of all public finance with the Paris Agreement.”

UKEF has made significant improvements in the past few years to reduce its contribution to climate change, including the decisive and welcome step made last year to end most support for the development of fossil fuel export projects overseas. Despite this, UKEF is not yet fully in line with the Paris Agreement. The report proposes ten new policies by which the UK can achieve full alignment of its export finance with the Paris Agreement and become the leading model ECA worldwide.

Transparency

• Recommendation one: Adopt the best international GHG accounting system for all scope 1-3 emissions. At the moment, UKEF does not operate a greenhouse gas (GHG) accounting system. But in its Climate Strategy, UKEF has already committed to implement a Scope 1-3 GHG accounting system. Using a reliable GHG accounting system is crucial to ensure progress towards GHG emissions reduction targets and improve transparency with regards to climate-related disclosures.

• Recommendation two: Disclose climate-friendly and climate-adverse financing across all of UKEF’s portfolio Currently, UKEF operates no dedicated climate-related financial reporting and it is therefore not possible to determine climate-positive or climate-adverse finance as share of neither new nor outstanding commitments. UKEF can use and build on the EU Taxonomy for Sustainable Activities, considering the latest scientific advances. This would require, for example, UKEF to clarify an exhaustive list of eligible activities under its ‘clean growth’ sectors, which should be based on sector-specific thresholds of the specific economic activity, such as proposed by the EU Taxonomy for Sustainable Activities.

• Recommendation three: Further enhance Task Force on Climate-Related Financial Disclosures (TCFD) reporting by providing quantitative indicators on GHG emissions. Currently, UKEF only reports qualitative information without quantitative indicators on GHG emissions, GHG emissions intensity, emissions reduction targets, and exposure to fossil fuel assets. While within its Climate Change Strategy UKEF committed to provide the first quantitative disclosure in its second TCFD report for 2021-22, what exact quantitative information would be provided is unclear. We recommend that UKEF clarifies this and reports in its second TCFD report the following quantitative data, as a minimum: new and cumulative outstanding commitments related to fossil fuels; new and cumulative outstanding commitments related to clean energy; scope 1, 2, 3 GHG emissions once they become available; and GHG emissions reduction targets by sector.

• Recommendation four: Incorporate Taskforce on Nature-related Disclosures (TNFD) for UKEF projects once they become available. We recommend that UKEF considers the developments under the Taskforce on Nature-related Disclosures (TNFD), which aims to provide recommendations for financial institutions to report and act on nature-related risks and opportunities. We recommend that UKEF evaluates the possibility of further extending disclosures to incorporate TNFD recommendations once they become available.
  

Mitigation I

• Recommendation five: Adopt a value-chain approach to stop UKEF supporting fossil fuel projects, directly or indirectly. Loopholes that may allow some fossil fuel projects to get export finance support from UKEF still remain. We recommend implementing a full phase out of support for fossil fuels including upstream – such as extraction – and downstream – such as conversion into petrochemical products. This will allow us to consider instances where fossil or renewable energy activities are also supported indirectly. Currently, UKEF does not operate a fossil fuel and/or clean energy reporting methodology.

• Recommendation six: Exclude all natural gas projects from future UKEF support. UKEF conveys the image of natural gas as a ‘transition fuel’, but the ‘Net Zero Pathway’ by the International Energy Agency states that the new investments into natural gas are not compatible with the special responsibilities of early industrialised countries. We therefore recommend a careful revision of the existing loopholes on fossil fuel financing, with a view to fully phasing out export finance support to all fossil fuel value chains, including natural gas in particular.
  

Mitigation II

• Recommendation seven: Adopt new Science Based Target Initiative (SBTi)-approved decarbonisation pathways and targets for all economic sectors which include projects supported by UKEF. UKEF should work closely with – and ultimately get approval from – the Science Based Target Initiative (SBTi), to develop clear decarbonisation pathways and targets for all economic sectors which include projects supported by UKEF, ideally based on the regularly updated and declining annual carbon budgets set by the UK’s Climate Change Committee (CCC).
  

Climate finance

• Recommendation eight: Set new targets for UKEF: a) a year-on-year increase for the proportion of climate-friendly financing across all of UKEF’s portfolio, and b) that half of all financing will be climate-friendly as soon as possible. This can be achieved more easily with a robust and transparent reporting system, as outlined in recommendation two. We would also recommend a target of 50% climate-friendly finance over the total portfolio in the short run, in line with the most ambitious targets by the multilateral development banks.

• Recommendation nine: Introduce a climate-reward system for exporters for UKEF financing, such as smaller premium or interest payments. We recommend devising and implementing an effective climate-reward system across UKEF’s entire portfolio. This could include enabling smaller premium or interest payments for projects that meet UKEF´s ‘clean growth’ eligibility, or other robust climate-friendly activities. This would create an additional incentive for UK exporters of clean technologies.

Engagement

• Recommendation ten: The UK should build on COP26 momentum to expand the Statement on International Public Support for the Clean Energy Transition and the OECD Arrangement to include phasing out fossil fuel support and closing remaining loopholes. The UK should build on the success of its COP Presidency so far by engaging in both multilateral fora – such as the OECD – and in bilateral exchanges – for example, with China – to further advance a decarbonisation of the global export finance system. An enhanced international commitment to phase out public support for all fossil fuel projects is needed, and the UK needs to take the lead internationally. By the UK demonstrating a full phase out is possible, it can be an example and support other countries to implement full phase-outs of their own, without any loopholes, of all types of fossil fuel projects supported by export finance. 

ENDS

Notes to editors:

To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Joseph Silke at joseph@brightblue.org.uk or on 07948 420 584.

• Bright Blue’s new report is entitled Greening UK Export Finance. The report is kindly supported by the European Climate Foundation. However, Bright Blue retains complete editorial control over the report. The views in the report do not necessarily reflect the views of the sponsor.
• The figures, unless otherwise stated, are from Opinium. Total sample was a broadly reflective sample of 750 senior decision makers at UK exporters. Polling was conducted between 12th and 15th November 2020.
• Perspectives Climate Group is a consultancy specialising in climate and sustainability services based in Germany.