Levelling Up and Net Zero - two sides of the same coin

Last week I took part in a panel discussion at the Institute for Government on the subject ‘How should the Government align Levelling Up and Net Zero?’

I was joined on the panel by The Rt Hon Phillip Dunne MP, Chairman of the Environmental Audit Select Committee, Julia Goldsworthy, the former Director of Strategy at the West Midlands Combined Authority, and Roz Bulleid, Deputy Policy Director at the Green Alliance.

It was a fascinating and wide-ranging discussion. Reflecting on the points made, I am clear that levelling up and hitting our Net Zero goals are two sides of the same coin – it will not be possible (or sensible!) to do one well without the other.

I have set out some further thoughts below on where the Government could act to better align these two important agendas.

Capital costs and HM Treasury’s funding model

One obvious area in which the Net Zero and Levelling Up agendas could be aligned would be through changing the way that the Treasury thinks about and makes capital spending decisions. Currently, decisions about whether projects get funding are based almost exclusively on up front capital costs.

This model means that Net Zero schools, hospitals and public housing developments often miss out on funding because they cost up to 30% more to build. However, this model fails to account for the very significant savings that Net Zero buildings will make over their lifetime – and schools, hospitals and public housing are exactly the sorts of projects that the Government aims to deliver as part of its Levelling Up strategy. There is clear room for alignment here and I would urge a rethink of the current funding model.

A pipeline to deliver the workforce of the future

If we are to deliver on the ambitions of the Levelling Up agenda and achieve our Net Zero goals, a great deal of work will need to be done in the coming decades – from retrofitting millions of houses, through to constructing new nuclear power stations. However, at present, the UK does not have a workforce with the skills needed for the many tasks ahead.

A large part of the reason behind this is that industry does not have sufficient certainty from Government to be able to make long-term plans. As a result, each year 40,000 people leave further education with qualifications related to the construction sector – only to find there are just 8,000 jobs available.

The Government could help to address this through taking a longer-term approach to procurement, committing to publishing a pipeline of projects over a 5–10-year period for local and centrally procured and funded projects. Such a move would have a dramatic impact on industry – allowing a more strategic approach to planning and the ability to make significant long-term decisions on hiring and upskilling those that will be delivering these projects in the future.

Conclusion

The UK’s ambitious Net Zero targets and the Levelling Up agenda must go hand in hand. They each need to be implemented with the same urgency, run along similar timescales, involve many of the same actors – and benefit many of the same communities. If the Government’s ambitions are to be realised, it will need to change some of the ways in which it works. This will mean taking a longer-term view on the affordability and carbon costs of projects and providing industry with the certainty necessary to ensure that such projects can ultimately be delivered.