The Green New Deal can be funded by simple changes to the current tax reliefs on pensions and ISAs, according to a report written by economists Richard Murphy and Colin Hines
First proposed in the UK by Caroline Lucas, who has written the report’s foreword, the Green New Deal aims to transform the economy by tackling the climate emergency and eradicating inequality. Modernising every aspect of society, the Green New Deal would invest in renewable energy, creating thousands of green jobs and moving to a circular, sustainable economy.
The Green Party has already pledged to invest £100 billion a year on a Green New Deal, with £91.2 billion funded through government borrowing and the rest provided through tax changes, including increasing Corporation Tax to 24 per cent.
Providing an explanation of the Green New Deal’s financial demands, the new report, entitled ‘Funding the Green New Deal: How we could Save for the Planet’, suggests that the government borrowing to finance the Green New Deal could be achieved by issuing bonds.
With regard to who will buy these bonds, Murphy and Hines, who are both members of the group that wrote the first Green New Deal report in 2008, suggest that funding should come from tax incentivised accounts, as 80 per cent of UK financial wealth is held in either pensions or ISAs.
With £70 billion a year saved in ISA accounts, the report suggests that these funds should be invested in Green New Deal bonds paying interest at an average rate of 1.85 per cent. Pension rules should also be changed so that, in exchange for tax relief given on pension contributions, which currently cost £54 billion a year, 25 per cent of all new pension contributions would be invested in the Green New Deal, raising £25 billion a year of funding.
In her foreword, Lucas says: “There is growing consensus on the urgent need for a Green New Deal to transform our economy and society to meet the challenges of the climate and nature crises and to reverse inequality. There is also growing recognition that it is both sensible and necessary for the government to borrow to invest in the future of our society, so that we can modernise our economy and move beyond fossil fuels.
“As Murphy and Hines remind us, people investing in pensions and savings will largely be from older generations who can thus play a vital part in the Green New Deal. They can save for their own benefit and at the same time benefit all of us, and in particular, younger generations.
“This inter-generational rebalancing could be another key element of the Green New Deal and merits further investigation. Working together, we can create a better future. For all of us, and the planet we share.”
The Green New Deal lies at the heart of the Green Party’s manifesto, which outlines plans for a ten-year ambitious programme that will invest in renewables, reduce energy demand and transform UK industry, transport and land use.
Placing climate action at the centre of government, the Greens plan to establish a new Department for the Green New Deal, which would be headed by a Carbon Chancellor in 11 Downing Street.
You can read the report in full on the Finance for the Future website.