Whether an initial allocation of £1.5bn of funding, in the form of debt and equity, loans and guarantees, can be enough of a catalyst to alter the otherwise unattractive investment characteristics remains to be seen, but it will be an uphill struggle.
On the plus side it creates an opportunity that would otherwise be wholly absent with a limited financial commitment.
The Labour government wants to use green finance and environmental issues as a stark dividing line between itself and the previous administration.
While the UK will continue to be a fairly minor player in this space, it does have the potential to widen the opportunity set for investors, and that can only be a positive at a time when much is made of the malaise of UK capital markets.
With Europe and the US experiencing significant political volatility, this is perhaps the opportunity Labour has spotted to take advantage of and stimulate growth, although how quickly this growth comes through is questionable.
Planning pain
One area that has without doubt held back UK growth in recent years is weak planning policy, another central tenet of the chancellor’s speech.
This was first on the list of International Monetary Fund recommendations made in its report on the UK in May, alongside easing labour mobility and encouraging business investment.
A lack of affordable housing has been most directly caused by too few homes being built.
In 1980 the average family spent 9 per cent of their income on housing costs, a figure which by the early 2020s had risen to 17 per cent, according to the Resolution Foundation.
Costs are exorbitant while living space is shrinking; the average space per capita across the UK is now lower even than in New York, a city known for its cramped apartments viewed with horror by most Americans – a factor often cited in falling birth rates, which cause their own drag on growth.
Similarly, corporate investment has stalled as planning applications now take far longer than they did even 10 years ago and are often turned down due to the lack of local support regardless of wider national benefits.
Civil war within the previous government saw mandatory building targets become ‘advisory only’ and meant Michael Gove’s comment that if young people cannot get housing they will abandon democracy – or at least the Conservative party – was particularly prescient.
There is almost zero ability from a fiscal standpoint to raise government spending on public services in the absence of tax rises or spending cuts.
