Labour should prioritise energy efficiency

With the pre-election political conversation so focused on saving money, it’s easy to forget that the next government will ultimately be spending some. Within an eye-watering fiscal framework, all parties are attempting to prioritise investment spending, though as a recent Fabian Society and CentreForum analysis showed, Labour and the Liberal Democrats have more room for manoeuvre, with fiscal rules which exempt capital investment, so long as the commitment to reduce the total national debt during the next parliament is met.

But even so, the future spending pot is not bottomless. So what should be the priority? A new report published by the Fabian Society and E3G makes the case that it should be energy efficiency.

Ever since Ed Miliband made energy bills the flagship issue of Labour’s ‘cost of living crisis’ narrative, energy prices have been a political football, though the style has been rather more unreconstructed long ball than tiki taka, with Labour’s price freeze countered by David Cameron’s move to get the ‘green crap’ off bills.

All the while, Britain’s homes are leaking energy at a staggering rate. The UK’s energy prices are actually relatively low compared to many of our European neighbours, but it costs more to keep our homes warm than elsewhere because of our leaky roofs, walls, floors and windows.

As so often, we have sought short-term quick fixes rather than investing in our long-term future. Labour’s thinking in opposition has been particularly influenced by the idea of ‘predistribution’, that it’s better and cheaper to equalise market outcomes at source rather than relying on the state to redistribute.

Similarly, social policy debate in recent years has been focused on moving ‘upstream’: preventing harms happening in the first place, rather than going through the expensive and cumbersome process of trying to repair the damage after the event.

We need to think the same way about our energy policy: the best way to reduce bills is to use less energy in the first place.

There are important political reasons why this should be an infrastructure investment priority for the next government. Our politicians tend towards grands projets when thinking about infrastructure; as my colleague Marcus Roberts puts it, it’s “far easier for the national decision-maker to succumb to the ‘bright shiny object’ of a single ticket project” like an HS2 or a Crossrail. But actually, in a world that seems increasingly out of control and our political leaders are increasingly distrusted and irrelevant, bringing a focus back to the local and increasing our power to effect small but significant changes there is very appealing. And nothing is more local than the homes we live in.

The new politics of energy efficiency must capture this and focus on putting people in control of their place in the world: their homes, their local environment and their family finances. It’s both a deeply conservative narrative, in that it talks of a spirit of duty and care to provide for our families and protect our neighbourhoods, and deeply progressive, as it invests in all of our futures.

There are also good economic reasons for doing this and the ‘value case’ for an ambitious household energy efficiency programme compared to roads or even rail is high. Analysis by Cambridge Econometrics and Verco indicates a £126.7bn investment programme would yield tax revenues of the order of £1.27 for every £1 invested by government, meaning the programme would pay for itself within 10 years. This, along with the £3.20 in increased GDP for every £1 invested by the government, gives a benefit:cost ratio that is ranked ‘high’ and compares favourably to HS2, which is only ranked ‘medium’.

In this context it becomes clear that energy efficiency could be an attractive driver of growth as well as an empowering political story. But energy efficiency is not currently part of the political discussion on investment priorities. While this remains the case, ambition is likely to be capped. This needs to change; the next government needs to make energy efficiency a national mission, priming the pump with investment focused on helping low-income households, and encouraging private capital with a new regulatory framework. Neither the climate nor hard-pressed households can afford it if they don’t.