In his now famous utterance of last month, the governor of the Bank of England, Mervyn King, did not quite say what he is assumed to have said by the commentariat and those anxious to do the idea of the need for further fiscal stimuli to the UK economy down. What he actually said was that there was room for further ‘targeted and selected’ measures; words rather drowned in the rush to claim that he had ‘tripped Brown up’ or as Conservative spin suggested ‘King says Britain cannot afford another fiscal stimulus’.
We are ruled by a democratically elected government, of course, and not by a King, but if we take what he says at face value, what might a targeted and selected further fiscal stimulus look like? What should it aim to do? Invest in the fabric of the country, so we had something to show for the package, create and sustain jobs, perhaps, and distribute and fix the stimulus locally, so that value added spending came out of it. If that is the ‘job description’, we don’t need to look very far for an ideal candidate.
This February, the new Department of Energy and Climate Change launched a consultation document heralding a new ambition on the vital subject of energy efficiency, which is the most effective way, in the near future, to reduce our energy use, save carbon emissions, and equip our homes and industrial buildings with the means to house people and industry on a low-carbon low-energy basis over the next 50 years. The ambition of the consultative document is great – to ensure that all homes in the country have a ‘whole house’ package of energy efficient measures applied to them by 2030, and for all lofts and cavity walls to be insulted by 2015. A new community energy savings programme will target investment from energy companies and the government in homes subject to fuel poverty, a programme already boosted by £350m last autumn alongside extra investment for the warm front programme.
Such a programme is vital as a part of our path to a low carbon future – and as the prime minister repeated just this month, our way out of recession will be a low carbon route. As a long-term investment, the programme makes great sense: money on bills is saved; employment, usually on a local basis is created and sustained; fuel poverty is tackled; and emissions are abated.
All of these benefits, though, also form the ingredients for fiscal stimulus – targeted, money saving, capacity building investment that puts money into the economy and sustains it locally. If we want a fiscal stimulus to the economy that delivers we should bring the time scale and horizons of this ambitious programme radically forward, starting with the budget. A programme of around £5bn per year up to 2020, sourced from public and private funds could, it is estimated, deliver a drop of 16 megatons of carbon dioxide emissions over its life, and generate well over 50,000 mostly long-term jobs. Some of this money is already allocated or will be shortly; but to bundle it together, early and clearly, would give the certainty of investment and intent that would make a programme fly reliably.
Going around the country systematically fixing houses and offices so that they keep heat in and consume less energy doesn’t sound very exciting or dramatic, but I think we would be hard put to find a form of fiscal stimulus that packs more of a punch for jobs, investment, or putting savings into peoples’ pockets. And of course it will be an early monument to our low carbon way out of recession. I for one, will give more than a modest cheer if that is one of the ways we choose to support recovery on Budget day.