Towards a budget for a Green New Deal
21 November 2008
[This goes almost to the point of recommending full money reform, but stops short at ‘Green Keynesianism’! – BL]
[Abridged. The full 7 400 word report can be viewed at http://www.taxresearch.org.uk/Documents/GNDNov2008.pdf or at http://www.greenparty.org.uk/assets/files/reports/Budget_for_a_Green_New_Deal_Nov2008.pdf.]
"This is a package for the short term that makes sense for the long term; a package where the debt we must incur now produces employment, green and financial benefits that more than pay for its cost; a package where the economic causes of the crisis are tackled at their root and a package that the people of the UK need - help in delivering them from a problem that was not of their making"
Richard Murphy, Co-Director of Finance for the Future and Director, Tax Research LLP, and a member of the Green New Deal Group.
A Budget for a Green New Deal - summary
The responses of governments to dealing with the financial crisis have been to cut interest rates, cut taxes, or increase public expenditure. This Green Party proposal for the Pre-budget Report states that these measures have to be judged in terms of their contribution to the wider economy as well as their effectiveness in dealing with the present economic crisis.
It is the Green Party’s conclusion that the present crisis, widely recognised as the worst since 1929, demands nothing less than a Green New Deal.In terms of a budgetary response it suggests a costed £30 billion public expenditure programme in largely labour intensive projects, starting with ensuring that all buildings in the UK are energy efficient and make the best use of renewable energy, and that interest rates should be kept low to encourage such a level of investment.
The report also suggests how private funds can also be encouraged to invest in such a programme via the encouragement of pension funds to secure a safe return for an income derived from saving energy costs and a number of novel savings vehicles.
The report makes some preliminary costed proposals for environmental taxes that could be immediately introduced, offset mainly by reducing VAT.We propose too reforms to the international financial system including significant action against tax havens, both to improve the regulation of the financial sector and to reduce tax avoidance.
The stimulus from the public expenditure programme will significantly reduce unemployment. The programme, combined with the tax changes, will also significantly reduce greenhouse gas emissions.
Finally the report calls for an inquiry into how acceptance by governments of the international neoliberal model caused this present economic crisis and what changes in economic direction could ensure a stable and environmentally sustainable economy.
Such a Green New Deal approach helps tackle not just the financial crisis but, because it reduces the use of fossil fuels, it increases our energy security and independence and helps tackle climate change.
Background In 2007 a group of campaigners, economists and industrialists, including Green Party Leader Caroline Lucas, met to discuss the concept of a Green New Deal.Their report, published in July 2008,1 argued that a strategy to combat severe recession would also be appropriate to the beginnings of a substantial strategy to deal with climate change and the implications of an encroaching peak in oil production. The Report has been welcomed by the Green Party as an important first step towards a more sustainable and equitable economy.
The extent of the consensus over the severity of the economic crisis is now remarkable. Already commentators are discussing a number of the policy measures anticipated in the Green New Deal.
However, the Green Party remain concerned that policymakers pay only lip service to the severity of the crisis. The associated policy measures that have been most fulsomely advocated are either wrong-headed or half-hearted. Radical action might be advocated, but its end is the preservation of the status quo. On the contrary, the Green Party argue that the unfolding crisis should be regarded as indicating the necessity of fundamental change to our society, our economy and our approach to the limited and fragile resources of our planet.
The Green Party therefore takes the opportunity of the publication of the Government’s pre-Budget Report to launch a preliminary and summary statement of economic policy measures to implement the Green New Deal. It has been written in collaboration with some members of the Green New Deal Group.2 While set in the context of and aimed at the present crisis, these policies anticipate the broader economic, social and environmental strategy of the Green Party. The policies set out here are for immediate implementation with a time horizon of no longer than one year. We propose to set out a more comprehensive medium term set of proposals for next year’s Budget in the spring.
The basic approach
First we are quite clear that significant support for the economy is required. This is true for both monetary policy (interest rates and money supply) and fiscal policy (government spending and taxation).
The Conservative U-turn announced on 17 November, where they will only countenance tax cuts matched by cuts in government spending,3 seems to be a return to their austere monetary policies of the early 1980s, will, like then, only lead to a prolonged recession, massive unemployment, huge human misery, increasing inequality and will make no contribution whatever to meeting the environmental crisis. We, like the government, reject this approach.
Apart from the Conservatives, there is widespread agreement that
the UK economy will need government support as we move into recession. There are
three ways in which this support could be provided:
First, the Bank of England could lower interest rates.
Second, the government could offer tax cuts.
Third the government could invest in creating new jobs.