London Daily

Focus on the big picture.
Thursday, Mar 05, 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
Iran Conflict Strains U.S.–U.K. Alliance as Trump and Starmer Clash Over Military Strategy
UK Interest Rates Could Rise Above Four Percent Again if Energy Shock Continues, Think Tank Warns
Starmer Defends Britain’s Iran Strategy as Badenoch Urges Stronger Military Support
Labour MP Says She Saw No Sign Husband Broke Law After Arrest in China Espionage Investigation
UK Jobless Rate Overtakes Italy’s for First Time in Years as Labour Market Weakens
United Kingdom Suspends Student Visas for Four Countries in Unprecedented Immigration Move
Campaigners Warn UK Student Visa Ban Could Push Migrants Toward Dangerous Channel Crossings
First U.K. Charter Flight for Stranded Nationals Set to Depart Oman Amid Middle East Crisis
France and United Kingdom Deploy Warships to Eastern Mediterranean as Middle East Conflict Escalates
U.K. Arrests Three Men Including Lawmaker’s Partner in Suspected China Espionage Investigation
Trump Says UK–US ‘Special Relationship’ Is Diminished Amid Middle East Dispute
UK Economic Forecasts Face Fresh Strain from Middle East Conflict and Rising Energy Costs
UK Reaffirms Close US Ties After Trump’s Public Criticism
Reeves Stresses Stability and Fiscal Discipline in UK Budget Update as Growth Outlook Shifts
UK Deploys Royal Navy Destroyer HMS Dragon to Cyprus After Drone Strike on RAF Base
Green Party Surges Past Labour in New UK Poll as Traditional Party Support Crumbles
Majority of Britons Oppose U.S. Use of UK Military Bases in Iran Conflict
UK Intensifies Evacuation Efforts from Oman, Working with Airlines to Boost Flight Capacity
Trump Condemns UK and Spain in Unusually Sharp Rift Over Iran Military Action
Trump Repeats UK Claims That Diverge from Verified Facts Amid Diplomatic Strain
UK Arrests Prominent Figures Linked to Epstein Network as Questions Mount Over US Action
Trump Says UK ‘Took Far Too Long’ to Approve Use of Airbases for Iran Strikes
Scope of Britain’s Role in the Expanding Middle East Conflict Comes Under Scrutiny
Trump Says He Is ‘Very Disappointed’ in Starmer Over Iran Comments
U.S. Embassy in Riyadh Struck by Drones Amid Escalating Iran Conflict
Starmer Confronts Strategic Test After Drone Strike Near British Base in Cyprus
Rolls-Royce Chief Signals Openness to Germany Joining UK-Led Fighter Jet Programme
UK Stocks Slip as Escalating Iran Conflict Triggers Global Market Selloff
UK Overhauls Asylum System to Make Refugee Status Temporary
Starmer Warns of ‘Reckless’ Iranian Strikes Amid Escalating Regional Tensions
British Base in Cyprus Targeted as Drones Intercepted Amid Expanding Iran Conflict
Starmer Diverges from Trump on Iran Strategy, Rejects ‘Regime Change from the Skies’
U.S. and Israel Intensify Strikes on Iran as Conflict Expands to Lebanon and Gulf States
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
Barclays and Jefferies Shares Fall After UK Mortgage Lender Collapse Rekindles Credit Market Concerns
Play Exploring Donald Trump’s Rise to Power by ‘Lehman Trilogy’ Author to Premiere in the UK
Man Arrested After Churchill Statue Defaced in Central London
Keir Starmer Faces Political Setback as Labour Finishes Third in High-Profile By-Election
UK Assisted Dying Bill Set to Fall Short in Parliament as Regional Initiatives Gain Ground
UK Defence Ministry Clarifies Position After Reports of Imminent Helicopter Contract
Independent Left-Wing Plumber Secures Shock Victory as Greens Surge in UK By-Election
Reform UK Refers Alleged ‘Family Voting’ Incidents in By-Election to Police
United Kingdom Temporarily Withdraws Embassy Staff from Iran Amid Heightened Regional Tensions
UK Government Reaches Framework Agreement on Release of Mandelson Vetting Files
×