Written evidence submitted by the Institute for Public Policy Research

Introduction

The Institute for Public Policy Research (IPPR) is pleased to make this submission to the Environmental Audit Select Committee.

Our submission draws from previous IPPR work in these areas listed below:

• On job estimates:
• Transforming the economy after Covid-19: A clean, fair and resilient recovery
• On skills challenges:
• Why the adult skills system is failing to build an economy that works for everyone
• Fixing the apprenticeship system locally
• On policy recommendations for just transition:
• A just transition: realising the opportunities for decarbonisation in the north of England
• Net-zero North Sea: A managed transition for oil and gas in Scotland and the UK after Covid-19
• On fiscal policy and spending:
• https://www.ippr.org/files/2020-11/the-chancellor-s-challenge-1-.pdf

Questions Submission

1.     What estimates are there for the jobs required to meet the pathway to net zero emissions, by sector, and other environmental and biodiversity commitments?

• IPPR published a report in July last year which found that over 1.6 million jobs could be created through investing in low-carbon projects and programmes over the next decade.
• The chart provided below summarises the job creation potential while also indicating ‘environmental benefits’ which reflect emissions saving potential and co-benefits, such as reduced air pollution and natural resilience. The size of the bubbles shows job creation potential over the next decade.[1] Three findings stand out:

-         First, energy efficiency retrofits for homes have high environmental benefits (e.g., buildings are amongst the largest emitting sectors), significant co-benefits (e.g., addressing fuel poverty) and generate a large number of jobs. Similarly, social housing building – when using high energy efficiency standards – can generate a large number of jobs while at the same time addressing the huge crisis in affordable housing. In total, the housing-related investments in the chart below could generate more than 560,000 jobs.

-         Second, there are huge gaps in social care and in health care. Current staffing gaps are expected to grow to almost 700,000 in these sectors, by 2030. Jobs in these areas fulfil huge social needs and at the same time are in line with a low-carbon economy.

-         Third, investing in better public transport – such as rail and electric bus services – as well as sustainable urban transport can be a jobs locomotive while lowering transport emissions. Investments in these areas could help generate more than 230,00 jobs.

Notes: The figure is based on a number of assumptions and should thus be treated as providing estimates for orders of magnitude. The environmental benefits ranking is based largely on total sectoral emission saving potential. These are adjusted based on whether they are direct emission savings (eg through electrifying transport) or indirect (eg through incentivising people to change modes of transport). Co-benefits such as adaptation, environmental restoration and air quality benefits are also factored in. The number of jobs is represents those that could be created up to 2030.

2.     Does the UK workforce have the skills and capacity needed to deliver the green jobs required to meet our net zero target and other environmental ambitions (including in the 25-year environment plan)?

• A supportive skills system is vital to provide the appropriate training to facilitate this transition. Without appropriate training, a vicious cycle ensues: if workers do not receive appropriate training, skills gaps in the low-carbon energy sector will widen. This will lead to slower growth in the industry as a whole, which in turn will limit the number of opportunities for workers to transition from high to low-carbon employment.
• The skills system in the UK is currently facing considerable challenges both with assessing the demand for skills and their supply.
• Looking first at challenges with assessing the demand for skills, in the absence of long-term policy certainty, whatever jobs projections are made may be over-optimistic as overall growth within the sector could be smaller.
• Furthermore, given the multi-national nature of developers operating in the low-carbon energy sector, if the domestic skills pipeline does not provide appropriately trained workers and Brexit results in burdensome restrictions on freedom of goods, services and labour, the attractiveness of investing in the UK’s low-carbon energy sector will decrease.
• Finally, there is also an ageing workforce within the energy sector. According to the Energy & Utilities Skills Partnership, 24 per cent of all workers in the sector are over 55 years old. Combined with those expected to leave to pursue other careers outside of the sector, in the next 10 years it is estimated that 220,000 jobs will need to be replaced. This further complicates the task of accurately projecting demand in future.
• In terms of skills supply, the skills system is already struggling to prepare for future skills demands in the low-carbon energy sector. Estimates recorded by the UKCES show that 36 per cent of businesses in the broad sector category ‘electricity, gas, steam, water and air conditioning’, reported having hard-to-fill vacancies, 85 per cent of which cited skills shortages as a reason for this. This was the highest proportion of any sector and well above the 23 per cent national average for companies citing skills shortages as a reason for vacancies.
• Moreover, previous studies combined with results from our own survey work reveal a number of challenges, both to workers who may want to transition from high to low-carbon employment and for new labour market entrants, with the way in which skills are currently being supplied in the sector.  These include:

-         Insufficient funding for adult retraining

-         Limited skills devolution for local economies

-         Lack of appropriate training

-         Lack of commonly recognised accreditation across the industry

-         Graduates without the right levels of experience

-         Failure to incentivise companies (particularly SMEs) to utilise the apprenticeship levy and ‘rebadging’ of existing training

-         The apprenticeship levy exacerbates regional inequalities since it is based on payroll and will therefore raise more in London

-         New T-levels not matching up to include training for professions on the Shortage Occupancy List

3.     What needs to be done to ensure that these skills and capacity are developed in time to meet our environmental targets?

• The UK government has made a good start by introducing a Green Jobs Taskforce to discuss skills needs to unlock the low-carbon employment opportunities of the future. However, the work of this group must be supported by conducting comprehensive skills audits to better inform policymaking by properly identifying skills gaps. Examples of the type of labour market information that would need to be collected are as follows:

-         The number of hard-to-fill vacancies due to skills shortages within the low-carbon energy sector.

-         The number of skills providers and whether this is sufficient to match demand.

-         An assessment of the quality of the training provided (going beyond apprenticeship success rates) and the completion rate achieved by providers.

-         The ease of access to these skills programmes, training courses and institutions.

• In addition to audits, to give workers the confidence to train, the UK government should establish lifelong learning accounts for all adults so that everyone has a personalised budget for training and introduce a right to career reviews and face-to-face guidance on training to help them access it.
• The UK government should both develop a comprehensive plan for a net zero workforce that embeds diversity and inclusion at its core, recognising that one of the challenges for the sector is diversity in the workforce and the fact that the number of women and BAME workers are underrepresented in the sector.
• The UK government should set up skills academies for existing workers that draw together existing initiatives and build on them.

• The main objectives of the skills academies can be summarised as the LEAF (listening, evaluating, accrediting, financing) framework. This will include:

-         listening to workers, industry, trade unions and training providers to understand workers’ anxieties, fears and aspirations, to understand skills gaps in low-carbon industries, and to establish between all stakeholders an accepted definition of good quality work

-         evaluating and quantifying the workers’ skills and assessing their transferability by conducting skills audits of the oil and gas workforce, working closely with industry to do so

-         accrediting training providers to ensure that all training provided is standardised to minimise administrative burdens, relevant and accessible, particularly under lockdown conditions where training may have to be conducted more regularly through online courses

-         financing companies and workers to access this training through a combination of grants, and zero-interest loans

• From a worker perspective, the intention would be to streamline these initiatives onto one online platform, advice service and/or newsletter provided by the skills academy so that skills provision is accessible, informative and user-friendly. While the skills academy would focus on re-training and upskilling for low-carbon industries, it should also offer comprehensive and accessible links to alternative government training schemes and careers advice services outside of the sector for workers who want to access different forms of employment.
• If the government is serious about place-based investment in its industrial strategy, then both the Adult Education Budget and any unspent levy funds should be fully devolved to LEPs without any legally-obligated spending rather than being retained by the Treasury or directed by it.

4.     What measures should the Government take to ensure that its proposals to meet environmental targets do not by default lead to jobs in affected industries being exported?

• Establishing domestic supply chains will be critical to maximising the potential for job creation.  However, already, there are missed opportunities.  For example, policy arrangements for offshore wind, while generating a strong project pipeline, have failed to generate a local manufacturing supply chain in Scotland for these projects.  This is best highlighted by the recent decision not to award contracts to the Scottish manufacturing company BiFab as a provider for new offshore wind projects in favour of an international provider.
• Consequently, to ensure that the full benefits of low-carbon investment are realised, both the UK and Scottish governments should build on the provisions of the new offshore wind sector deal and make funding and support for low-carbon projects contingent on leveraging inward investment from industry into local communities and, crucially, hiring from UK-based suppliers in order to establish a strong, domestic low-carbon manufacturing base. The UK government should also include local labour clauses in all contracts for energy projects going forward.
• IPPR has also argued that the UK’s response to the climate and nature crises must also go further and take into account both its consumption emissions and global environmental footprint abroad. This would ensure that the UK does not shift the burden of its consumption to other countries, export its environmental footprint, or import products with standards that would not be accepted at home. In addition, it would also help to ensure that jobs are not exported abroad, by paying greater attention to the emissions of imported goods as well as those made at home.
• To put this into practice, the UK government should commit to a target on consumption emissions as part of its wider net zero strategy. The government should seek advice from the independent Committee on Climate Change (CCC) on the best means on doing so and whether the adoption of a legal target is desirable and viable.

6.    Are the Government’s ambitions for green job creation in the public and private sectors sufficient for the scale of the challenges? What changes should be made?

• The recent 10-point plan is a good starting point, but it is largely insufficient to meet the scale of the challenge set out in the Climate Change Committee’s most recent 6th carbon budget and largely omits specific considerations around just transition. The UK is presently set to miss its legally binding fourth and fifth carbon budgets and is also failing to make progress on international targets on halting and reversing biodiversity loss.
• Recognising this challenge and the need to invest and stimulate the economy after covid-19, IPPR has argued for the government to usher in a new era of public investment for a fairer, stronger and greener economy. The IMF and the OECD have made clear that across countries – and particularly in the UK – public investment has been neglected at the expense of economic prosperity and the wellbeing of citizens.
• This should begin with a commitment to invest all of the additional £33bn a year needed to deliver the UK’s net-zero emissions target and restore nature. This would put the UK on a more certain path to net-zero than the relatively modest increases announced by the government over recent months - including in the prime minister’s new 10-point plan.
• Investments that could create jobs, decarbonise the economy and restore nature include:
1. Homes and buildings: the government should go beyond its existing green voucher scheme and set out a ‘Home Improvement Plan’ (Webb et al 2020). This would be a large-scale energy efficiency programme to significantly raise the energy efficiency of homes and buildings across England and shift to low-carbon heat. The UK government should prioritise electric heat pumps, heat networks and energy efficiency upgrades as the main technologies for retrofitting homes. Our estimates suggest that an additional £8 billion is needed each year.
2. Nature restoration: Invest in tree planting and peatland restoration across the country. This should include the expansion of green spaces including parklands, with a particular focus on deprived areas without current access to green space to ensure fairness and justice is at the heart of these schemes. Our estimates suggest that an additional £4.7 billion is needed each year.
3. Transport infrastructure: Invest to significantly expand low carbon public transport infrastructure by bringing forward investment in rail and electric buses and bus networks. Such investment, in buses in particular, will benefit poorer households who are disproportionately reliant on the bus network for their travel needs. Our estimates suggest that an additional £10.3 billion is needed each year in sustainable forms of transport.

7.    How can the UK ensure jobs are created in areas most impacted by the transition to a low-carbon economy?

• The government’s commitment to creating four industrial clusters by 2030 is welcome and could help to ensure areas that are most impacted by a transition to a low-carbon economy are supported.  In response to Question 8 below, we provide further examples of the kinds of place-based investment which just transition policies could provide.

8.    What additional interventions should be undertaken to aid in a ‘just transition’?

• In addition to the recommendations on skills mentioned in response to Question 3, below we set out a series of recommendations that maximise job creation, the fair treatment of workers and communities and a clear emphasis on place in line with the government’s levelling up agenda.
• Building on the Scottish Just Transition Commission, the UK and Scottish should increase capacity and funding to transform it into a Net Zero and Just Transition Delivery (NZJT) body.  Funding should also be provided to establish similar bodies at the regional level and a similar process should also be followed in Wales and Northern Ireland.  As IPPR has previously called for, this ramp up in capacity should come from Just Transition Fund of an initial £5 billion.
• As a first priority, these bodies should work with trade unions to arrange evidence sessions with workers in industry affected by decarbonisation. From here, working with unions, workers, industry and community voices, this body would establish Just Transition Agreements for different sectors and regions of the UK economy, covering a range of issues including: the overall number of jobs or workers employed, pay and conditions, job security, working time, job descriptions, duties assigned to job roles, training and skills, apprenticeships, retirement policy, monitoring and surveillance, performance management, health and safety implications and equal opportunities.
• Within these agreements, the types of activities which NZJTs might resources towards to resolve the issues mentioned above, could include:

-         Clustering of new industries, academia and technical colleges on existing sites Regional clusters can help to develop new technological specialisms and fortify university-business relationships.

-         Boosting local development and creating a positive feedback loop through inward investment, including education, training and local infrastructure, entrepreneurship and small businesses.

-         Investing in local low-carbon energy projects.

-         Repurposing carbon-based assets for new industries.

-         Funding to support workers close to retirement to act as trainers, coaches or mentors to younger staff.

-         Wage subsidies for those workers who may be made unemployed as a result of transition following a model similar to the furlough scheme introduced since the pandemic.

-         Just transition ‘toolkits’ for affected industries to inform managers and leaders of companies about where to access wage subsidies and other support services which could then be passed on to workers.

-         Travel assistance for workers where new employment is expensive to reach.

-         Additional support for mental health and wellbeing services for workers whose jobs may be at risk or may be making efforts to find new employment.

-         Many of the skills in at-risk sectors are transferable as such, we recommend.

10. What contribution can green jobs make to the UK’s economic recovery from Covid-19?

• We estimate that more than 1.6 million jobs could be created if supported through concerted government action and private investment. This means clean recovery investments could generate about three-quarters of the jobs expected to be lost during the Covid crisis.

Note: ‘Jobs lost in covid crisis’ sums to the 2.1 million additional unemployed workers in the OBR scenario

11. How can the UK ensure high emissions are not locked-in when tackling unemployment?

• IPPR has argued for a ‘Net Zero and Nature Rule’ to be introduced by the UK government, devolved nations and local government to ensure all projects, policies, investment and spending, taxation measures, regulations and legislation are in line with the UK’s obligations under the Paris Agreement and net zero commitments, as well as broader environmental commitments.
• Such a rule would ensure that any projects or policies designed to tackle unemployment after covid-19 would also be in line with the UK’s wider climate and environmental goals.

January 2021