Chasm widens between Sunak and Johnson on cost of net zero

A leaked government document has revealed a widening chasm between Prime Minister Boris Johnson and Chancellor Rishi Sunak over the economic impact of the UK reaching net zero by 2050.

Despite Johnson preparing to put the UK at the forefront of global efforts to fight climate change as host of Cop26 climate summit next month, a Treasury document leaked to The Observer shows Sunak is tilting toward a more sceptical view on the benefits of tackling climate change.

The transition toward net zero could make it relatively more costly to do business in the UK, resulting in firms moving overseas to countries with more welcoming business regimes, the document said.

“Climate action in the UK can lead to economic activity moving abroad if it directly leads to costs increasing, and it is more profitable to produce in countries with less stringent climate policies.” 

The government will have to hike taxes to offset the fiscal impact of the UK transitioning to net zero.

“The government may need to consider changes to existing taxes and new sources of revenue throughout the transition in order to deliver net zero sustainably, and consistently with the government’s fiscal principles,” the document said.

Johnson is preparing to put the UK at the forefront of global efforts to fight climate change as host of the Cop26 next month, while Sunak is thought to be positioning himself as climate sceptic.

The government is preparing to launch its net zero strategy, and heat and buildings strategy, which includes a ban on new gas boilers from 2035.

A recent report by the Office for Budget Responsibility (OBR) estimates the cost of reaching net zero within the government’s 2050 timeframe could hit as much as £1 trillion. However, long term gains are likely to be much higher than the cost of inaction.

“While unmitigated climate change would spell disaster, the net fiscal costs of moving to net zero emissions by 2050 could be comparatively modest,” the OBR said.

The Treasury said: “The government is committed to tackling climate change and the prime minister has set out an ambitious 10-point plan to help us achieve that. The Treasury is playing a crucial role in this effort, by allocating £12bn to fund the plan, setting up the UK infrastructure bank to invest in net zero, and committing to raise £15bn for projects like zero-emissions buses, offshore wind and schemes to decarbonise homes.”