At PMQs, David Cameron outlined that yesterday’s House of Commons vote against a cross-party amendment to set a clean power target for 2030 was the right outcome. While the issue might seem a long way from the electorate’s concerns, the result will have a serious impact on the working lives of many people in the country.
Clare McNeil is a Senior Research Fellow at IPPR
At PMQs, David Cameron outlined that yesterday’s House of Commons vote against a cross-party amendment to set a clean power target for 2030 was the right outcome.
While the issue might seem a long way from the electorate’s concerns, the result will have a serious impact on the working lives of many people in the country.
British businesses and investors, whose plans for expansion may be set off course by this vote, were not alone in watching yesterday’s debate unfold. Global investors ready to create jobs in parts of the country worst affected by the economic slowdown were also taking note.
This includes companies like German manufacturing giant Siemens, which plans to build an £80m wind turbine factory on the east coast in Hull, a city where 15,000 are out of work. A Siemens factory would create hundreds of jobs, but the firm is yet to make a final investment decision, because it is unsure about committing to a long lease on a port site if it cannot see a market for offshore wind lasting beyond 2020.
Other firms like Mitsubishi, Gamesa, Vestas, and Doosan have also indicated an interest in building UK manufacturing facilities but haven’t made final decisions.
The amendment to the energy bill would have given them assurance and set the UK on the path it needs to follow if it is to meet the legally binding climate goals it has set for 2050 – though the decision may be revisited when the Bill reaches the House of Lords later this year.
The government has estimated that £110bn of investment is needed in energy infrastructure by 2020. This need for investment coincides with near record private sector balances in the UK economy as companies choose to hoard savings in assets earning zero or negative real interest rates in ‘risk-free’ securities. This amounts to £99bn, or the equivalent to 6 per cent of UK GDP, according to researchers at the Grantham Research Institute at the LSE.
But the opportunity to match these balances with investment opportunities is being lost because private companies don’t have the confidence to invest in energy infrastructure when the government is so confused about whether it is really committed to a low carbon future or wants to embark on a ‘dash for gas’.
Yesterday’s vote could push back indefinitely – and possibly for good – some of the plans for jobs and growth many UK and foreign investors have for the UK. Some companies may be willing to wait for a clearer and stronger sense of direction from a new government in 2015, but for others, investment decisions need to be taken now. Without clarity today, markets like Germany or Brazil could benefit at the UK’s expense.
Investors are only waiting for the coalition to show greater commitment to its own policies for a low carbon economy. The Liberal Democrat and Tory MPs strong armed into voting against the amendment yesterday may not regret yesterday’s outcome, but if this government’s confusion continues their constituents might.
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