London, 9 July: The Global Warming Policy Forum (GWPF) has criticised the Office for Budget Responsibility (OBR) for failing to assess the full fiscal risks of the government’s Net Zero policy.
In a statement published today, the GWPF shows that the OBR’s Fiscal Risk Report 2021 relies unquestioningly on unduly optimistic assumptions and cost estimates by the Climate Change Committee (CCC).
Despite identifying the fact that the ‘indirect effects’ of Net Zero policies could have negative fiscal consequences, the OBR fails to assess these effects and does not address the likelihood that Net Zero costs could be significantly higher than the CCC’s £1.4 trillion cost estimate on which it bases the risk analysis.
The OBR failed to consider the possibility that far from seeing a steady reduction in the cost of decarbonisation, renewable electricity and low carbon technologies (heat pumps, electric cars/hydrogen vehicles) remain expensive, thus increasing the cost of doing business in the UK, eroding economic competitiveness and reducing fiscal receipts from income and corporation tax.
By ignoring these possible and — in our view — likely scenarios, the OBR has failed to identify the grave fiscal Net Zero risks facing the UK state.
The OBR’s adoption of the Climate Change Committee’s blinkered optimism undermines confidence in its projections of direct fiscal costs to government, but the danger of mistakes concerning indirect effects is of even greater magnitude, and suggests that the OBR is failing in its statutory duties.
Notes for Editors
OBR turns a blind eye to Net Zero policy risks
OBR: Fiscal Risk Report – July 2021