George Osborne has suffered a further blow to his credibility after global financial institutions such as Bank of America and the insurance giant Aviva accused him of driving away crucial investment in the energy sector.
On the day of the Chancellor’s Conservative Party Conference speech, investors controlling more than £1trn of assets have strongly criticised him after he removed from the Energy Bill a clause that would have made Britain’s electricity supply almost entirely green by 2030.
The group, which also includes the Hermès, Schroders and Threadneedle Investment funds and Marks & Spencer’s pension trust, says the “decarbonisation” target is crucial to financing a £110bn overhaul of Britain’s energy network.
“The UK has the potential to offer a safe harbour for renewable energy investors in Europe, but the delay in delivering a stable policy framework is weakening our prospects and holding back investment,” said Ben Warren, a partner at EY – formerly Ernst & Young – which is also part of the group.
The attack comes as the Coalition government is said to be in talks to delay the implementation of a multi-billion-pound green scheme to help take the pressure off the fuel bills. It is reported to be considering agreeing to the demands to reform the home insulation scheme, the Energy Companies Obligation.
But other investors have warned the Government must step up its commitment to the green agenda. The financial consortium is concerned that the Government has failed to signal a clear commitment to low-carbon energy, making it very difficult for potential investors to determine the risk associated with backing wind, solar and other energy projects. As a result, many are shying away from making important investments, they argue.
The uncertainty lies around the Government’s commitment to low-carbon energy centres and a decarbonisation target. This was inserted into the Energy Bill currently passing through Parliament by the Liberal Democrat Energy Secretary, Ed Davey, but was later removed by the Chancellor – although he has held out the possibility of revisiting the matter in 2016.
Today’s criticisms – put to the Chancellor in a letter – represent the first time a group of heavyweight financial institutions has publicly rebuked him over his energy policy.
The attack on Mr Osborne comes in the week after Ed Miliband shocked the Labour Party Conference by announcing a two-year freeze on energy bills should he come into power – at the same time as a pledge to create 1m jobs by decarbonising the UK’s electricity supply by 2030.
A government spokesman said: “The UK is recognised as one of the most attractive locations in the world for offshore wind investment. The reforms we’re making to the electricity market are designed to increase investor certainty further and bring forward investment in wind and other renewables.”Reuse content