London Daily

Focus on the big picture.
Saturday, Dec 27, 2025

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
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
UK Households Face Rising Financial Strain as Tax Increases Bite and Growth Loses Momentum
UK Government Approves Universal Studios Theme Park in Bedford Poised to Rival Disneyland Paris
UK Gambling Shares Slide as Traders Respond to Steep Tax Rises and Sector Uncertainty
Starmer and Trump Coordinate on Ukraine Peace Efforts in Latest Diplomatic Call
The Pilot Barricaded Himself in the Cockpit and Refused to Take Off: "We Are Not Leaving Until I Receive My Salary"
UK Fashion Label LK Bennett Pursues Accelerated Sale Amid Financial Struggles
U.S. Government Warns UK Over Free Speech in Pro-Life Campaigner Prosecution
Newly Released Files Shed Light on Jeffrey Epstein’s Extensive Links to the United Kingdom
Prince William and Prince George Volunteer Together at UK Homelessness Charity
UK Police Arrest Protesters Chanting ‘Globalise the Intifada’ as Authorities Recalibrate Free Speech Enforcement
Scambodia: The World Owes Thailand’s Military a Profound Debt of Gratitude
Women in Partial Nudity — and Bill Clinton in a Dress and Heels: The Images Revealed in the “Epstein Files”
US Envoy Witkoff to Convene Security Advisers from Ukraine, UK, France and Germany in Miami as Peace Efforts Intensify
UK Retailers Report Sharp Pre-Christmas Sales Decline and Weak Outlook, CBI Survey Shows
UK Government Rejects Use of Frozen Russian Assets to Fund Aid for Ukraine
UK Financial Conduct Authority Opens Formal Investigation into WH Smith After Accounting Errors
UK Issues Final Ultimatum to Roman Abramovich Over £2.5bn Chelsea Sale Funds for Ukraine
Rare Pink Fog Sweeps Across Parts of the UK as Met Office Warns of Poor Visibility
UK Police Pledge ‘More Assertive’ Enforcement to Tackle Antisemitism at Protests
UK Police Warn They Will Arrest Protesters Chanting ‘Globalise the Intifada’
Trump Files $10 Billion Defamation Lawsuit Against BBC as Broadcaster Pledges Legal Defence
UK Says U.S. Tech Deal Talks Still Active Despite Washington’s Suspension of Prosperity Pact
UK Mortgage Rules to Give Greater Flexibility to Borrowers With Irregular Incomes
UK Treasury Moves to Position Britain as Leading Global Hub for Crypto Firms
U.S. Freezes £31 Billion Tech Prosperity Deal With Britain Amid Trade Dispute
Prince Harry and Meghan’s Potential UK Return Gains New Momentum Amid Security Review and Royal Dialogue
Zelensky Opens High-Stakes Peace Talks in Berlin with Trump Envoy and European Leaders
Historical Reflections on Press Freedom Emerge Amid Debate Over Trump’s Media Policies
UK Boosts Protection for Jewish Communities After Sydney Hanukkah Attack
UK Government Declines to Comment After ICC Prosecutor Alleges Britain Threatened to Defund Court Over Israel Arrest Warrant
Apple Shutters All Retail Stores in the United Kingdom Under New National COVID-19 Lockdown
US–UK Technology Partnership Strains as Key Trade Disagreements Emerge
UK Police Confirm No Further Action Over Allegation That Andrew Asked Bodyguard to Investigate Virginia Giuffre
Giuffre Family Expresses Deep Disappointment as UK Police Decline New Inquiry Into Andrew Mountbatten-Windsor Claims
Transatlantic Trade Ambitions Hit a Snag as UK–US Deal Faces Emerging Challenges
Ex-ICC Prosecutor Alleges UK Threatened to Withdraw Funding Over Netanyahu Arrest Warrant Bid
UK Disciplinary Tribunal Clears Carter-Ruck Lawyer of Misconduct in OneCoin Case
×