I have been asked how I would fund the Green New Deal. This is a response I prepared to support some thinking a little while ago. I should add that I have not edited to indicate that this is solely my thinking:
We face a world of massive insecurity:
- For people;
- For jobs;
- For the environment;
- For our savings;
- For young people;
- For pensioners;
- For the services we all rely on.
The Green New Deal is about transforming our future.
- We all know that the climate science argument is settled now: global heating is our fault;
- We have to beat human-created global warning unless we want to become extinct;
- We must build a new society in which we can all both survive and prosper, which is not what we have right now.
The Green New Deal will deliver:
- Security for our planet by limiting and then reversing climate change;
- Secure food supplies by supporting biodiversity;
- Secure jobs for the long term to create:
- The energy efficient housing we all must live in;
- The new energy generation systems we need,
- The public transport infrastructure and replace carbon fuelled vehicles,
- The ‘circular economy' to minimise waste and resource use;
- The new agriculture we require;
- The forests that must be a part of our landscape;
- The businesses that can meet our needs in a sustainable future, and
- The social facilities we will need in the future.
- Secure savings by putting them to good use, with a government guarantee to back them up;
- Secure old ages by underpinning our pension funds;
- Security against the risk of conflict which the scarcity of food, water, energy and other resources will otherwise create if we do not act now.
How will we do this?
The Green New Deal will:
- Transform the UK's 30 million buildings so that they're all energy efficient by 2030 - creating hundreds of thousands of jobs on the way right across the UK, as well as the training and support services they'll need;
- Turn as many of those buildings as possible into power stations by fitting solar panels and other generating alternatives;
- Build new social housing to end our housing crisis;
- Investing in renewable energy of all sorts on and offshore;
- Build a non-carbon based transport infrastructure;
- Invest in agriculture that protects biodiversity;
- Require that business transform itself to become zero net carbon and provide the funding to help them to do that if they cannot find it themselves;
- Provide security for people's savings, which will be used to fund this innovation at better rates of return than most savers enjoy now;
- Deliver pensions that will work.
How much will this cost?
- We think the Green New Deal will in itself cost at least £50 billion a year;
- We accept that on top of that requiring that businesses be net-zero carbon - as it's going to have to be - will create additional costs and that business will need help to fund this transition;
- The need may then be for £100 billion a year for at least a decade;
- But that's just 5% of the UK's annual income - a small price to pay for a secure future;
- And it's only about 8% - or less than a twelfth - of total UK private wealth.
How do we pay for this?
- We think that this transition can be paid for without increasing taxes;
- About £100 billion a year is paid into UK pension funds and all of that money gets tax relief from the government. The total tax subsidy costs £54 billion a year. We say 25% of those contributions should go into Green New Deal Investment in exchange for that tax relief. That would supply about £25 billion a year to the Green New Deal;
- About £70 billion is saved in ISAs a year. If ISA tax relief was dependent on these funds being invested in the Green New Deal in future at a government-guaranteed rate of 2% we think that all this money might be available to the Green New Deal.
- Right now these two sources of funds should, by themselves, fund the whole cost of the Green New Deal.
- But what we would add is that all this new economic activity in jobs that we would plan be paid at least a real living wage would create additional tax revenues that would also help pay for the Green New Deal, the interest payable on any borrowing and other measures to relieve the impact of austerity;
- And we should also note that the Green New Deal does not rely on expensive fossil fuel imports, so our international economic position will improve as well.
What are Green New Deal Investments?
Green New Deal investments will take the form of a whole range of products that will be made available for people and pension funds to invest in, including:
- Green gilts issued by central government to fund Green New Deal projects;
- Bonds issued by a National Investment Bank to fund:
- Green New Deal projects;
- The transformation of 30 million properties in the UK;
- New social housing;
- New transport infrastructure;
- Renewable energy;
- Research and development;
- Green New Deal training;
- Businesses who want to work to deliver the Green New Deal;
- Local bonds issued by devolved governments, cities and counties that want to pursue their own Green New Deals to deliver the above types of project;
- Approved shares and bonds that will be issued by companies to fund their Green New Deal projects.
How can anyone be sure that their Green New Deal investments are secure?
Right now the UK has what's called Financial Services Compensation Scheme. This means that anyone who has up to £85,000 in a bank deposit account is guaranteed to be repaid by the government if that bank fails. Everyone involved knows the value of a government backstop guarantee for their savings.
The Green New Deal will involve a similarly guarantee. Every single Green New Deal approved bond or deposit or loan will be backed up by the government to the same limit the Financial Services Compensation Scheme. Your savings will, then, be safe.
And this is easy to arrange. The government can offer such a guarantee because unlike anyone else a government can create the money needed to back up its guarantees, which is exactly what it did when over the last ten years it effectively supplied £435 billion of funding to UK banks and other financial institutions through its quantitative easing programme, which backed up their solvency. We call our guarantee scheme Green QE. What Green QE guarantees is that the money to deliver the Green New Deal will always be secure. And that means that we think more than enough to deliver the Green New Deal will be invested.
What role does Green quantitative easing play in this?
The honest answer is 'not a lot'.
The capital cost of the Green New Deal can be paid for by government borrowing - and we are quite sure that the funds are readily available for that purpose.
Tax would only have to cover revenue costs, such as interest, and addressing the impacts of austerity and additional revenues from the Green New Deal should cover both.
In that case, green quantitative easing would only do what it was ever designed for, which was to provide a guarantee that funding was available. It could be used if savings completely dried up in the event of a downturn (which is very unlikely). Beyond that, it would be the mechanism used to guarantee there will always be a market for green investments. We strongly suspect it will never be used.
The Green New Deal will deliver long-term security:
- For people;
- For jobs;
- For the environment;
- For our savings;
- For young people;
- For pensioners;
- For the services we all rely on.
The Green New Deal is the way to the world we need to live in.
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I watch the Left/Right debate, an example is the USA,
the Democrats want a GND to invest in a green transformation of the economy,
the Republicans are outraged at the prospect of printing yet more money to achieve this,
neither side mentions the trillion dollars spent each year on the military and intelligence services,
surely there is vast scope for the reallocation of a portion of existing budgets and expenditures before further money creation is required?
the UK doesn’t have the bloated ‘defence’ sector the USA has, but;
surely a return to the owner occupier ethos of British housing would produce more bundles of private mortgages for pension funds to invest in whilst allowing owner occupiers to build up capital in the form of housing equity instead of being bled dry by rentier landlords?
if local authorities could build and rent out affordable council housing they would build up assets and a revenue stream?
tenants of affordable social housing would see an increase in their prosperity due to reduced housing costs without need of a wage rise,
a move away from private transport to a fully integrated and affordable public transportation network would redirect a vast sum of money currently spent on car purchases, insurance, maintenance and fuel into a sizeable revenue stream in the form of fares?
of course initial investment will be required to kickstart transitions but once underway it would be more of a rebalancing of the economy as opposed to ‘yet more spending’?
maybe a little more emphasis of this when pitching a GND might sweeten the pill?
Miracles take a couple more sides!
Mat B says:
“….surely a return to the owner occupier ethos of British housing would produce more bundles of private mortgages for pension funds to invest in whilst allowing owner occupiers to build up capital in the form of housing equity instead of being bled dry by rentier landlords?”
More bundles of private mortgages ?….. you don’t think that pressure to create a heap of sub-prime mortgages might be problematic. Especially so with near-certainty of a financial crash coming our way and the prospect of house prices normalising and banks being in serious difficulty with their trousers round their ankles again ?
We do need a government committed to increasing the stock of public sector housing, though. Without that any return to the owner occupier ethos (as you call it) would just create another round of ludicrous property price inflation. We have been there. It didn’t seem like a good idea in retrospect.
Public transport suggestions noted, but don’t forget just how attached we are to our cars. It will be a long time before that “sizeable revenue stream in the form of fares ” materialises. Yer integrated sustainable transport network is going to have to substantially undercut motoring costs to persuade people in large numbers to change their preferred mode of transport.
It worked for me. Financially it was ‘no contest’. I ditched my car in favour of a free (Scottish) bus pass. People working modern shift patterns couldn’t take that option without considerable improvements in service operating hours. Lack of service only constrains my leisure and social travel options, not my livelihood.
We’re going to have to get out of the cash profit driven market mindset to make the sort of changes we need to see developing.
I t seems so to me anyway.
bear in mind that Fannie Mae was born out of the chaos of the great depression in the USA, it was part of FDR’s New Deal,
it stabilised the US housing market and laid the foundations that made the American Dream become a reality,
then in the 1990’s that feckless twat Clinton came along and kicked off the biggest swathes of irresponsible deregulation imaginable and within a decade and a half everything had turned to shit,
Finance isn’t bad, in many respects it’s essential, what is extremely stupid is reckless deregulation,
2008 was the result of letting Billy Bunter loose in the sweetshop totally unsupervised.
Agree with all. Couple of comments:
“Turn as many of those buildings as possible into power stations by fitting solar panels and other generating alternatives;”
I have already modelled this for 200 — 25 houses (& for houses at various states of energy renovation)
The 50bill looks right. I would expect any & all activity related to the green new deal to have a multiplier effect (as is the case for each 1 pound spent with NHS having a multiplier of 2.5 to 4).
In terms f where does the kit come from — as some news outlets noted — a UK offshore windfarm developed by EdF will use steel from Indonesia — thousands of tonnes of it. This nonsense has to stop — the UK is quite capable of making the steel for any lrge off-shore structures and this should be zero/low carbon steel (from elec arc furnaces powered by…. Renewables). Apologies for going into one detail — but government needs to get to grips with this so that the benefits of the GND are fully maximised.
Noted!
Funding is vital as is the focus of its use, but what is missing is the requirement for IMMEDIATE reductions in emissions.
To make the desired impact there must be: LESS travel — and the travel that there is must consume LESS fuel; FEWER consumer goods and LESS advertising which is promoting consumption; very much LESS construction — which is energy intensive … with a drive towards NONE.
The almost universal unconscious conviction is, first, a grudging admission that action is needed – so money will need to be spent but, second, that such action should make very little impact on our lives — if any!
However, “Professor Sir David King says situation so grave UK should cut emissions of greenhouse gases to almost zero by 2040.” https://theecologist.org/2019/sep/16/feel-fear-climate-breakdown. The government’s former chief scientist said it is “appropriate to be scared” about the pace at which climate change is taking place.
And it doesn’t take much research to discover that the Arctic and Antarctic are melting progressively year by year – as are most glaciers, Greenland, Northern Canada, Alaska and Siberia. The release, from what was ‘permafrost’, of methane is accelerating global overheating.
Tradable Energy Quotas (TEQs) https://www.flemingpolicycentre.org.uk/teqs/ would encourage every user think about their consumption. That said, the public is not prepared for such a policy because of press reports and government policies which have been consistently misleading; for instance, “net zero by 2050” gives the impression that this is a distant problem. (The first demand of Extinction Rebellion is ‘Tell the truth’ https://rebellion.earth/the-truth/demands/)
Regulations also have a part to play – but industry tends to use its muscle to fight their introduction every inch of the way (Company directors appear to act as if they already have another planet ready for themselves and their families and friends.)
I have to admit that such plans are not realistic
I know we have a crisis
I know we need action
But stopping everything now cannot help
I am afraid there has to be some sort of transition, even if short
Joe Burlington says:
“…..IMMEDIATE reductions in emissions.
To make the desired impact there must be: LESS travel — and the travel that there is must consume LESS fuel; FEWER consumer goods and LESS advertising which is promoting consumption; very much LESS construction — which is energy intensive … with a drive towards NONE.”
We can’t do all this at once without shutting down the economy.
What we need to do immediately, and what could easily be done immediately is to change direction TOWARDS what you are demanding. We haven’t started that change of direction yet; we’re still just thinking about it and wondering if we dare make a move without everybody else in the world holding our hand and coming with us.
We also need to pitch demands positively. ‘Much less travel’ equates to having more available (pleasant) accommodation closer to where people work, or work based closer to where they already live. Who would vote against wasting less time commuting ?
Reduction of leisure travel would spin positively into longer holidays ….instead of hurried short breaks we go for a fortnight or longer – a month or more for long haul. Same amount of travel distance, but fewer journeys and a better experience. Who would vote against longer, better, more relaxed holidays ?
Instead of less construction which is energy intensive…reorder the words: Less energy-intensive construction.
Sustainable energy, and better thermal insulation means lower heating bills. I’d vote for that.
This all has to be ‘sold’ to people who don’t want to change and are in denial in some cases of the need to change. Millions are striving to manage their lives as they are. We have to seek the benefits and highlight them. And there’s a useful job for the advertising industry instead of flogging consumer jewjaws and trinkets. We have the skilled practitioners but we aren’t employing them properly. We need them working for the vision, not against it.
The vision has to be of a better life and lifestyle, not a list of ‘Thou Shalt Not’ s.
Agreed
@Andy Crow
Absolutely agree with your focus on promoting alternatives.
Another example, instead of just begging people not to take so many flights, develop competitively priced rail alternatives for European travel. Put in place a proper network of overnight sleeper trains that could use existing infrastructure and therefore be offered at a more attractive price.
We will also need to stop building houses to face the road but the sun. With pitched roofs at the right angle facing south for those solar panels.
I live in a mid ’60s semi with a roof that faces E-W. Nobody local with such roofs has fitted solar panels with one exception and those look like solar thermals for water heating. I will not thus be investing in solar panels.
Individual wind is not an option either. The wind swirls amongst the houses up on top of the hill here. A turbine would have to be pretty high to escape that effect. BUT there is an area of grass and trees between us and the next estate (walking or cycling between them is quick, driving no). Community turbines could be erected there, possibly two.
Locally there are two large wind turbines at the local ex Michelin tyre factory which are very effective. Apart from general wind they exploit katabatic winds which fall down the river valley.
So a two Green Deal funded community turbines please.
BTW back in New Zealand houses are built to face the sun. Since older houses at least are all wood with corrugated iron roofs on pile foundations they can be jacked up and turned 90 degrees if necessary. One of my sisters lives in a wooden villa which was jacked up to first floor level and a breeze block under story built underneath. The opposite of a loft conversion. You enter from the back walking up wooden decking.
Thanks for more detail on the Green New Deal.
The jobs of which you speak require new competencies that minimum wage workers may not have but need to acquire if they are to participate in the GND to lift their families and themselves out of poverty.
Kindly describe these jobs and the competencies they require so folk can seek the necessary training in good time to benefit.
Thanks.
It’s called training
Delivered over the period involved
And if the policy is adopted that will be what will be delivered
Training is what I said.
But to develop what new competencies exactly?
We have to enable to working poor to add more value through their work. For this they need new competencies as well as new opportunities.
I suggest you are wasting my time
@Waggle:
“We have to enable the working poor to add more value through their work. For this they need new competencies as well as new opportunities.”
If you understand the concept of adding ‘value’ through work you can probably work out some of the answers you seek. You will need to consider that it is not the working poor who are the nub of the problem here. A great many of the working poor are already adding considerable value in real terms – doing necessary work within society but being paid a pittance for doing so.
A large part of the problem we have currently is at the other end of the social economic scale where, in banking and finance for example, a great many very highly paid workers are adding no value whatsoever. There is a need for a range of financial and banking services; managing pensions, insurance, day to day handling of financial transactions, but the big money is made by trading which is zero sum: capturing the differential in prices across space and time. Every profit is somebody else’s loss. There’s no ‘value’ created. in order to continue like this governments need to keeping creating more money. Mario Draghi has just announced another £20 billion monthly to be injected into this fatuous casino economy. He’s making the asset bubble bigger and more fragile; more likely to crash and the impact greater when it does. Prices divorced from value will eventually correct. They nearly always do so in a dramatic manner causing widespread chaos.
The DWP is another case in point. There are good people working in the DWP, (I’ve met some of them), but underpinning the culture is not to add value to people lives and society as a whole but rather to make the non working poor even poorer and more miserable. They are paid reasonable salaries (at the top of the scale they will be paid UNreasonable salaries, I expect) but for what ? Much of what they do is actually counter-productive.
Take the health services as another example. If Boris Johnson can remain as PM, and his spending promises come to anything, I’m prepared to wager that most of any new money will go into buildings and equipment when the value of the health services is created mostly by the medical and nursing practitioners of whom we have too few, are training too few and then undervalue and underpay them.
Regarding ‘added value’ to be represented only as increased profit is what has got us where we are. We need to start assessing what value is, and start rewarding those who are generating it. Then maybe we will be better equipped to look at the specifics of what new skills we need to learn.
You personally, could usefully learn a new competency of understanding value, particularly so if you are in a position to have any influence on working practices and any influence on the way other ‘movers and shakers’ see the world.
There’s specific recommendation for you. With access to the internet, learning has never been so readily available. Go for it. If you delve into the archive of this site you’ll find screeds of valuable links to start the journey.
Hi Richard,
This is exciting stuff, and it should be the purpose of effective government to deliver these kinds of responses to big challenges. It seems sometimes that the “state bad/market good” ideology has left politicians with not enough of consequence that they think they can influence. They therefore obsess over relatively unimportant questions that are within their self-restricted area of responsibility like Brexit rather than the vital subject of the climate emergency.
Labour seem to be waking up – noting your information about submissions for their party conference – let’s hope this continues/accelerates.
I don’t know if there is a link, but there is is a piece in similar vein in the Guardian today: ‘The beauty of a Green New Deal is that it would pay for itself’ https://www.theguardian.com/commentisfree/2019/sep/17/green-new-deal-climate-disaster .
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