Press releases

2021 Spending Review and Budget fails UK climate leadership test

UK Chancellor Rishi Sunak speaks at a press conference in September with UK PM Boris Johnson in the background. Photo via Number 10 on Flickr
UK Chancellor Rishi Sunak speaks at a press conference in September with UK PM Boris Johnson in the background. Photo via Number 10 on Flickr
  • The Spending Review and Budget were critical tests of the Treasury’s commitment to delivering the Government’s Net Zero Strategy. Failure by the Chancellor to invest enough in the net zero transition and support green business means the Government has failed this test. 
  • Heat and buildings remain the greatest investment gap in green spending, with nearly £10bn additional investment needed to get this Parliament on track to net zero and deliver healthier low carbon homes that are cheaper to run.  
  • Overseas Development Assistance is to remain at 0.5% of national income until the end of this Parliament, with a provisional date for a return to 0.7% set for 2024/25. The inclusion of Special Drawing Rights and vaccine donations as part of the UK’s aid budget results in an effective further cut to ODA. 


E3G, the independent climate change think tank, has found that the Chancellor has failed to inject enough public investment into the green economy at the Budget to get the UK on track to net zero. The most significant investment gap is to decarbonise UK buildings, with at least £10 billion more investment needed.  

The Politics 

There has been significant tension between Number 10 and the Treasury this year, with the Chancellor failing to invest in the Prime Minister’s vision for sparking a green industrial revolution. To get on track to net zero, the Climate Change Committee has said that public investment in the transition needs to double. But with only around £7bn of new investment announced in the Net Zero Strategy, this is not enough to fill the gap. 

E3G is concerned that the failure of the Treasury to back up the Net Zero Strategy with enough public investment will both damage the prospects for a UK green recovery and undermine the credibility of the UK as a global climate leader. 

Decarbonisation of Heat and Buildings 

The major green investment gap in the Spending Review is the decarbonisation of buildings. Last week, the Government announced funding for buildings last week as part of the Heat and Buildings Strategy – widely criticised at the time as not enough. £5000 grants will be made available for heat pumps from April 2022 but only a £450m pot was provided. This is only ten percent of the scale of public funding required to get the UK on track to net zero. Heating for homes and business is responsible for almost one third of UK emissions.  

The Government has also failed to provide any funding for home insulation for 60% of UK households, who own their own home and are not fuel poor. The Government has also broken its manifesto pledge on funding support for insulation for low-income households and public buildings by £2 billion for this Parliament. The failure by the Chancellor to provide the public investment for green homes is despite the overwhelming support for it from the civil society, business, and finance stakeholders as critical for net zero, levelling up and green economic recovery – as well as reducing fuel bills at a time when gas prices are soaring.  

International Commitments on Climate Finance 

Whilst the UK’s commitment to spend £11.6bn on International Climate Finance is ringfenced, today’s announcement confirms the aid budget will not return to 0.7% of national income until end of this Parliament. The inclusion of special drawing rights and vaccine donations in the aid budget has also effectively cut it. With the Office for Budget Responsibility now projecting economic growth in the UK to return to pre-COVID levels by the turn of the year, this raises the question of why the ODA budget was cut in the first place. 


Juliet Phillips, E3G Senior Policy Advisor for Place Based Transitions at E3G:  

“A nationwide retrofit drive of our leaky homes is mission critical for net zero and the Government’s ambition to ‘level up’ opportunity and living standards across the UK. The Spending Review has failed to close the investment gap to get us on track for climate targets, and risks undermining progress towards healthier, energy efficient homes which are cheaper to run. 


Moving forward, the Treasury can supercharge a green home retrofit drive through the new green gilt – which has committed the UK to an additional £16bn of green spending – and offering attractive deals to households and local authorities through the new UK Infrastructure Bank.” 

Shane Tomlinson, E3G Deputy CEO said: 

“The Chancellor has splashed the cash at this Budget but has chosen not to prioritise green investment. This leaves at least a £10 billion investment gap to get on track for the Governments net-zero plan. It is now clear that there is an increasing divide between the Prime Minister’s ambition for a green industrial revolution and the Chancellor’s willingness to make this happen. The UK will now have to come back after the crucial Glasgow COP26 summit and rebuild ambition to walk the talk and demonstrate delivery.” 

Claire McConnell, E3G Policy Advisor, EU-UK Climate Diplomacy: 

“The Treasury has today effectively announced further cuts to the UK’s overseas aid budget by including vaccine donations and the Special Drawing Rights that they got as a windfall from the IMF. For a successful COP26, which begins in 4 days, the UK needs the support of low- and middle-income countries to deliver the high-ambition commitments necessary to keep 1.5C in reach and transition out of all fossil fuels. Instead, the Government is directly damaging those countries, and the relationships it needs.” 

Available for comment 

Please contact our experts directly (expertise in brackets):  

Ed Matthew, Campaigns Director, E3G (Net zero strategy, Spending Review) 

m: +44 (0) 7827 157 906,   

Juliet Phillips, Senior Policy Advisor, E3G 

m: +44 (0) 7443 503 328,    

Claire McConnell, Policy Advisor, EU-UK Climate Diplomacy 

m: +49 (0) 160 944 35 841,  

Heather McKay, Policy Advisor, Sustainable Finance, E3G (Net Zero Review, Net Zero Strategy, Green Finance) 

m: +44 (0) 79 555 97676,   

For further enquiries email or phone +44 (0)7783 787 863 

Notes to Editors 

  1. E3G is an independent climate change think tank accelerating the transition to a climate safe world. E3G specialises in climate diplomacy, climate risk, energy policy and climate finance. -> About 
  2. To receive updates and analysis from COP26 via E3G’s daily media WhatsApp broadcast, register here


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