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UK Urged to Boost Green Public Funding by £26 Billion Annually to Counter Environmental Challenges

A pivotal study by the London School of Economics and the University of Cambridge advocates a substantial increase in the UK government's annual public investment for addressing climate change, biodiversity loss, and environmental degradation. The recommended increment amounts to around one per cent of GDP, equating to approximately £26 billion annually. This strategy aims to rectify years of inadequate funding and set the UK on a firm path to meet its environmental commitments.

The report, unveiled today, starkly warns against persisting with the low public investment levels specified in the latest Autumn Statement. This course and ongoing obstacles to business investment in sustainable and green assets will likely compromise the UK's competitive standing and push the economy towards further stagnation.

Titled 'Boosting growth and productivity in the United Kingdom through investments in the sustainable economy,' this collaborative work from LSE and Cambridge experts argues for increased public investment and a "coherent set of public policies." The authors believe these steps are vital in driving innovation and encouraging private sector investment in combating climate change and environmental degradation.

The report states, "The direct public finance required to support this transition should not be expected to worsen public debt/GDP dynamics. Indeed, by facilitating long-term resilient growth, borrowing to invest is the only way to secure enduring public debt sustainability."

It further suggests that such government measures could eventually lead to public and private investments amounting to at least three per cent of GDP annually, translating to around £77 billion.

The report addresses concerns over potential economic impacts, such as higher taxes and inflation, resulting from increased public spending on eco-friendly infrastructure. It counters these arguments by asserting that shifting to a sustainable, inclusive, and resilient economy would drive productivity and growth, enhancing the UK's fiscal health.

"There will be upfront investment costs to delivering the transition to sustainable, inclusive and resilient growth, but targeted and temporary borrowing for good public net investment reduces the debt-to-GDP ratio over time and is fiscally responsible," the report adds, emphasizing the long-term benefits of such an approach.

The analysis also highlights that the need for government support will diminish once a robust, sustainable innovation system is established. This will occur as newer, more efficient industries outpace older, polluting ones, creating their revenue streams and attracting foreign investment.

Inaction, the report cautions, could lead to a decline in economic competitiveness and financial resilience, necessitating costly future interventions. Current investments, particularly in unsustainable sectors, risk creating stranded assets, significant financial losses, and an unreliable, expensive, and unsustainable energy supply.

In conclusion, the report posits that a sustainable, inclusive, and resilient economy would boost productivity growth and reduce pollution and waste, thereby improving public health and creating more livable cities.

Meanwhile, discussions about Labour's £28 billion green investment plan continue, with recent reports from The Sun suggesting potential revisions to the plan, despite Labour leader Keir Starmer and senior Shadow Ministers' earlier affirmations of the £28 billion annual target.


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