London Daily

Focus on the big picture.
Saturday, Sep 19, 2026

Billions of pounds in the red, UK budget to have greenish hue

Billions of pounds in the red, UK budget to have greenish hue

British finance minister Rishi Sunak’s annual budget on March 3 is set to have a green tinge, even as the country goes hundreds of billions of pounds into the red to fund its response to the coronavirus pandemic.

Sunak will move forward with plans to launch Britain’s first “green” government bonds - designed to finance environmentally friendly investments - and might also nudge the Bank of England to focus more on climate change.

But any progress on carbon taxes - endorsed by the International Monetary Fund in October - is likely to be slow as Sunak grapples with how best to close a 400-billion-pound ($556 billion) budget deficit, the largest since World War Two.

Britain is hosting a major United Nations environmental summit, COP 26, in November and Sunak told other finance ministers last week that he wanted action on climate change to be a major theme of Britain’s chairmanship of the G7 this year.

Philip Dunne, the Conservative chair of the British parliament’s Environmental Audit Committee, said Sunak should use the budget to make progress on a government promise to reduce net carbon emissions to zero by 2050.

“The government has a golden opportunity from COP26 to be able to start showing some international leadership on these issues,” he said.

In a report published on Wednesday, the committee urged Sunak to lower the 20% rate of value-added tax on domestic energy efficiency projects and increase incentives to buy electric cars.

The finance ministry should also start “scoping” work on new taxes on carbon emissions, and aim to have concrete proposals ready before the end of the year, Dunne said.

Britain has taken a piecemeal approach to environmental taxes. Duty on vehicle fuel has been frozen since 2012, and household energy bills have long benefited from a reduced rate of VAT.

But with a budget deficit of 130 billion pounds expected to remain after the economy recovers from the short-term shock of the COVID pandemic, according to U.S. bank Citi, Sunak will be on the hunt for new revenue.

GREEN GILTS


In the short term, one thing Sunak has committed to is the launch of so-called “green” gilts as part of 2021/22 borrowing plans which will be announced on March 3. The scale of the green issuance and the maturity of the bonds is not yet known.

Britain has lagged behind other European countries in issuing this type of debt, in part because the government’s debt office feared it would have to offer higher interest rates than for normal bonds, which are more liquid.

However, Germany sold green bonds last year at a rate lower than conventional debt, and the global market is rapidly gaining scale with around $300 billion of issuance last year.

For Simon Youel, head of policy at campaign group Positive Money, green bonds are partly a symbolic gesture.

“There’s no reason why ordinary gilts can’t be funding green infrastructure,” Youel said. But there would be benefits to bringing more transparency about what the government views as green investment, he said.

A bigger concern for Positive Money is the Bank of England, which the campaign group says has been too reluctant to nudge businesses in a more carbon-neutral direction.

Sunak should use his annual review of the BoE’s remits to make it take full account of the government’s environmental goals, and to sell its holdings of bonds issued by oil and gas companies, Youel said.

The BoE made the purchases as part of a stimulus plan launched at the height of the pandemic. It has since said it would be wrong to blacklist particular firms.

This year the BoE will for the first time require banks and insurers to look formally at risks they face from climate change and publish results in early 2022.

($1 = 0.7188 pounds)

Newsletter

Related Articles

0:00
0:00
Close
Addison Lee Founder Loses £20.5 Million Non-Domicile Tax Case
BrewDog Creditors Face Heavy Losses After Collapse
Thirteenth Metropolitan Police Officer Dismissed Over Charing Cross Conduct
Oxfordshire Village Votes Symbolically to Leave UK Over Asylum Accommodation Plan
NHS Approves Life-Extending Treatment for Women With Incurable Breast Cancer
Software Defect Blamed for Major UK Air Traffic Disruption
Twenty Women Underwent Unnecessary Mastectomies at County Durham NHS Trust
British Steel Costs Taxpayers £1.3 Million a Day as MPs Demand Long-Term Plan
UK Parliament Advances Sovereign Grant Reform Setting Royal Funding at £99.9 Million
King Charles Urges Human-Centred Approach to Artificial Intelligence at Scotland Summit
House of Lords Begins Scrutiny of Voting-Age and Political Finance Reforms
UK Labour Market Shows Growing Divide Between Younger and Older Workers
Nearly Seven in 10 UK Small Businesses Delay or Cancel Growth Plans as Costs Rise
Andy Burnham Reaffirms UK Net-Zero Target Amid North Sea Energy Debate
UK Parliament Demands Credible Financial and Decarbonisation Plan for British Steel
MPs Urge Government to Reject Thames Water Rescue Deal and Prepare Special Administration
Bank of England Holds Rate at 3.75% as Energy Shock Raises Inflation Risks
TUC Calls for Social Energy Tariff Funded by Higher Taxes on Bank Profits
UK Parliament Enters Conference Recess After Advancing Sovereign Grant Legislation
King Charles Hosts Artificial Intelligence Leaders at Dumfries House Summit
Nearly Seven in Ten UK Small Businesses Delay or Cancel Growth Plans as Costs Rise
Anthropic Details Malicious Use of Claude in Cyber, Weapons and Influence Operations
McLaren Announces £500 Million UK Investment and 1,000 New Jobs
Scotland and Wales Sign Cardiff Agreement to Deepen Cooperation on Shared Policy Priorities
UK Government Moves to Fully Fund Teacher Pay Award as Strike Threat Recedes
UK Competition Regulator Deepens Scrutiny of Microsoft’s Business Software and AI Market Position
NHS England Reforms Focus on Cutting Waiting Lists and Improving Digital Care
England Maintains Mandatory Housing Targets in Push for 1.5 Million New Homes
UK Government Plans Statutory Industrial Strategy Council to Strengthen Long-Term Economic Policy
Asthma Charity Warns of Major Gaps in Childhood Diagnostic Testing Across England
TUC Chief Paul Nowak Appointed to Bank of England Court
Bristol Opens £35 Million Deep-Tech Innovation Hub at Temple Quarter
Oxfordshire Village Votes Symbolically to Leave UK Over Asylum Housing Plan
Andy Burnham Deepens UK Defense and AI Cooperation With NATO and Canada
UK Government Announces Neonatal Safety Reforms After Thirlwall Inquiry
Bank of England Weighs Rate Decision as UK Inflation Rises to 3.1%
UK Health Unions Warn of Staffing Pressures as Public and Private Pay Growth Diverges
Rockstar Games Faces Tribunal Claims From 23 Former Grand Theft Auto VI Developers
UK Treasury Faces Tighter Budget Constraints as Borrowing Costs and Pension Spending Rise
Prime Minister Andy Burnham Sets Out Ten-Year Plan for Greater Public Oversight of Utilities
UK Economy Grows 0.4% in July as Services and Technology Activity Strengthen
Scotland, Wales and Northern Ireland Leaders Coordinate Push for UK Constitutional Change
Police Tighten Public-Order Measures After Anti-Immigration Protests in Dover and Portsmouth
UK Ministers Pressed for Answers After US Diplomat Accused of Child Abuse Images Leaves Britain
Jaguar Land Rover Pursues NATO Defense Contracts for Defender Vehicles
British Service Member Dies in Road Accident While Deployed in Ukraine
George Osborne Calls for Britain to Rejoin EU Customs Union
Anthropic Chief Dario Amodei Urges Faster UK Action on Advanced AI Risks
UK State Pension Set for 3.9% Rise Under Triple Lock
UK Labour Market Cools as Payrolled Employment Continues to Decline
×