Campaigners have warned that Britain is hurtling towards a new
economic crisis, and call for a £50bn "Green New Deal" to create more
sustainable growth and better-paid jobs and equip the country for a
low-carbon future.
After two quarters of better-than-expected GDP
growth and a batch of positive economic indicators – including rising
house prices and upbeat business surveys – the coalition is hoping the
summer economic bounce will turn into a longer-term recovery. But five
years on from their first demands for a radical reworking of Britain's
business model, the
Green New Deal group, which includes Green party MP
Caroline Lucas,
economist Ann Pettifor and tax expert Richard Murphy, says the need for
an alternative approach is greater than ever. In a report published on
Monday, and seen by the
Observer, it argues that recent growth
has been based on unsustainable rises in consumer spending and house
prices and could end in "the mother of all credit busts".
"Recovery
is an interesting word to apply to an economy that is marked by rapidly
rising personal debt, highly insecure and often low-paid work, and
rising underlying carbon emissions. What we're calling a recovery is
poor, divided, indebted and polluting," said Andrew Simms, chief analyst
at thinktank Global Witness and an author of the report.
Central
banks have poured cheap money into financial markets to drive down
interest rates and prevent deflation and depression. But Green New Deal
says this is a dangerous gamble: "Given the choice, they prefer to have
the problem of asset prices going through the roof than the problem of
deflation. If they are wrong and the bubble bursts before the recovery
arrives, it will be the mother of all credit busts," it says.
Under
an alternative plan in the Green New Deal report, the government would
invest £50bn into expanding green technologies over five years, building
low-cost housing, and employing a "carbon army" to insulate hundreds of
thousands of homes and reduce energy use.
The authors say these
measures would create more, and better-paid, jobs than the current
debt-fuelled bounce, which Pettifor described as an
"Alice in Wongaland"
recovery. Lucas, who is the MP for Brighton Pavilion, said a grassroots
workforce could be trained to lag Britain's chilly lofts "within
weeks". "Ministers want to cut a nice big ribbon on a new nuclear power
station – but this would be far more effective in getting our emissions
down quickly," she said.
Real incomes have continued to fall over
the past year, as above-target inflation has outpaced pay growth, in
what the TUC has described as the greatest wage squeeze since the 1870s.
Green New Deal argues that if more workers were paid a living wage it
would help to create more sustainable consumer demand. Frances O'Grady,
the general secretary of the TUC, which begins its annual congress in
Bournemouth on Sunday, supported the Green New Deal initiative, saying:
"The
green economy
already employs nearly a million people, in areas from electric-car
manufacturing to wind-turbine installation. Implementing some of the
ideas in this report could help these industries create more of the
skilled and well-paid jobs we need if we are to build a sustainable
recovery."
The authors suggest their pro-growth policies could be
paid for by scrapping the controversial HS2 rail project; cracking down
on tax evasion; and launching a fresh round of
quantitative easing.
Instead of using electronically created money to buy government bonds from City investors, as the
Bank of England
has done with almost all of the £375bn-worth of QE it has undertaken
since 2009, the proceeds this time would be used to invest in green
projects, and pay off private finance initiative debts, freeing up
public money to be spent elsewhere.
The report argues that investing in
affordable housing, in particular, would benefit those on lower incomes
more than the better off. "It can mean that people have more disposable
income after housing costs, which in turn boosts spending in the local
and national economy," the report says.
The authors argue that a
rapid boost in the supply of housing would also help to "dampen the
housing bubble beginning to appear in response to government measures
such as Help to Buy, which facilitates prospective homebuyers to find a
deposit". The controversial Help to Buy scheme was the centrepiece of
George Osborne's March budget, and has been questioned by a number of
critics, from the former governor of the Bank of England, Lord King, to
the International Monetary Fund, amid fears that it could create a new
property boom.
Mark Carney, the Bank's new governor, has said he
is "very alert personally" to the risk that a housing boom is emerging –
and said he was ready to burst any bubble, by targeting mortgage
lending.
Reforming the bailed-out banking system is another
central proposal of the report, suggesting that Royal Bank of Scotland,
which is majority-owned by the taxpayer, could be broken up into a
series of regional lenders that would build relationships with local
industries. "All the mechanisms which have been brought into play to
encourage lending to the productive part of the economy don't seem to be
working," says Simms.
Labour has promised to introduce a British
Investment Bank, to boost lending to businesses; but it has eschewed
much of the Green New Deal agenda over the past five years, focusing on
an emergency VAT cut as the centrepiece of its policies to create a
recovery.
Other members of Green New Deal include Charles Secrett,
former director of Friends of the Earth; Jeremy Leggett, chairman of
green energy firm Solarcentury; and Larry Elliott, economics editor of
the Guardian.
Article Source: http://www.theguardian.com/environment/2013/sep/08/invest-greener-recovery
