Giving evidence to the Environmental Audit Committee last week, Positive Money Executive Director Fran Boait told MPs that the Bank of England and the Treasury have missed a golden opportunity to green the post-Covid recovery. She explained how the Covid-19 response is failing to protect jobs and deliver on the green transition, and put forward Positive Money’s vision for the next phase of the recovery.
Our response to Covid-19 represents a huge opportunity to restructure the economy, kickstart the green transition, and prioritise health and wellbeing over GDP growth. But so far the Treasury and the Bank of England have failed to deliver. Last week, Positive Money Executive Director Fran Boait told the Environmental Audit Committee that “there is a huge appetite for serious change in the public for a green, fair recovery… but this isn’t [being] delivered by policymakers”.
We were really pleased to be invited to present our evidence and latest thinking directly to decision makers, and to contribute to this critical inquiry. It was also great to share the floor with Maria-Krystyna Duval, Head of Climate at ClientEarth, who’ve done great work outlining the environmental conditions companies should have to commit to in order to qualify for UK assistance during the Covid-19 recovery.
Fran focused on three areas of the recovery that require urgent rethinking:
- The Bank of England’s corporate bailout scheme, the Covid Corporate Financing Facility (CCFF), which has failed on its own terms by propping up environmentally and socially irresponsible business models with no-strings attached funding. This has allowed 60% of CCFF recipients to lay off workers, whilst paying £11.5 billion in dividends.
- The Bank of England’s quantitative easing (QE) programme, which is still fuelling environmental breakdown, with fossil fuel companies remaining eligible for an additional £10 billion of corporate QE.
- The fiscal response – schemes to support businesses and households – which has prioritised protecting banks and landlords rather than lower income debtors and renters. This point was powerfully made by IPPR’s Shreya Nanda in our recent webinar on ‘Debt, Inequality and Covid-19’ – watch it here.
As Fran emphasised, the government could be taking steps to move towards an economy that would “protect health and wellbeing, as well as maintaining living standards, while supporting the green transition.” A jobs guarantee, education and training schemes, and investment in infrastructure should all be key priorities. The government could also double down on job creation in healthcare, education and social care – sectors that meet human needs with little or no environmental impact.
Green MP Caroline Lucas joined Positive Money in criticising the government’s recovery process for ignoring the impending climate emergency: “we don’t just face a Covid crisis, we face a climate crisis… And if we’re not very careful, we’re going to be jumping out of the Covid frying pan into the climate fire”. On the specific issue of conditionality, Lucas added that this had been a “wonderful opportunity” for the Bank to impose climate-related financial disclosure on large companies receiving public money, and expressed disbelief that Andrew Bailey had not even raised this with the Treasury as a possibility.
Sarah Breeden, the Bank’s Executive Director for UK Deposit Takers Supervision (who also oversees the Bank’s work on climate change), responded to this criticism by emphasising that the Bank is now considering imposing climate-related financial disclosure as an eligibility requirement for its corporate bond purchase scheme. But her defense was vague and non-committal: “that is the sort of condition that we are discussing internally, and will, with HMT [Her Majesty’s Treasury], discuss how we could incorporate that in our remit”.
While it’s promising to hear that a discussion around disclosure is finally underway, the Bank has undoubtedly been dragging its feet, since Andrew Bailey pledged to make climate action “a priority” back when he became governor in March. The urgent task now is to make sure that these proposals are strengthened, rather than watered down even further. Asking companies to disclose their climate risk to be eligible is, of course welcome, but not enough. Truly decarbonising the corporate bond purchase scheme would mean excluding polluting companies whose business models are incompatible with the government’s climate commitments.
Diverting bailout funds away from big polluters, and improving regulation to make private banks do the same, are the demands of our latest petition. Add your name here – because every day the Bank and the Treasury fail to act is another missed opportunity to green our recovery.
Watch the full Environmental Audit Committee hearing here.