Reaching for net zero: why we need a super-deduction for green skills
Last year, a raft of new policies began to provide an outline for a new kind of British economy – one for which the future is most definitely green. A big piece of the puzzle is still missing, however. There’s no clarity about where the people to fill the promised green jobs are.
We’ve already seen the impact that a skills shortage can have on environmental ambitions. The government pledged £1.6bn via the Green Homes Grant to make homes more energy efficient, and take a crucial step in cutting UK emissions. Yet the scheme found it couldn’t get money out of the door, partially because there was a lack of workers with the right qualifications. Turning on the taps in the Treasury wasn’t enough. The scheme closed after only seven months, upgrading just 8 per cent of the houses it had planned to.
We often let market signals work their magic when it comes to skills. The green transition, however, requires more careful management.
Firstly, the pace of change required is rapid. The majority of emissions cuts must happen in this decade and training people takes time. Waiting until we have a shortage is not an option. What’s more, the UK no longer has easy access to the pool of European Union workers who previously lent the labour market a great deal of flexibility. And without the right people, we risk exporting businesses – and jobs – to countries that have prepared their workforces for a new, greener economy.
A mismatch of skills is often blamed for the UK’s weak productivity, which has grown by only 0.4 per cent a year since the financial crash. Employers already report significant skills shortages; more need to invest in training their own staff.
There are structural barriers to this: there is nothing stopping a newly trained employee leaving for a new job and taking their skills with them. This fear of losing employees can be off-putting to individual companies. Yet, we should remember that highly skilled workers are more productive. They benefit the wider economy, even if they move jobs.
So the government must create more incentives for employers to train their staff in useful skills. And, given the pressing nature of the green transition, it should make sure the money it puts forward is invested wisely – in the skills that will underpin the future greener economy.
Government can stimulate investment with a variety of tools and incentives. Most recently it has deployed a super deduction, which grants 130 per cent tax relief on any plants and machinery bought by companies until the end of March 2023. The Office for Budget Responsibility expects this to bring forward business investment, boosting it by 10 per cent in 2022-23.
In a decade of such rapid change, however, limiting tax relief to physical capital is short sighted. What we really need is a new super-deduction for green skills. It’s time to value our human capital as much as the physical and prepare the workforce for shifting demands. And, more widely, we should place this within a new national framework that tracks the types of green skills needed, and where and when.
That way, government can shoulder some of the risk for training workers and support thousands of good quality jobs across the country. From new battery chemists in Coventry’s Gigafactory or hydrogen producers in the Humber, equipping workers for the future is essential to levelling up and to making sure the UK is a global leader in the industries of tomorrow.