Green economy could ease unemployment crisis

Hugo Dixon, The Independent

Boris Johnson said last week that “many, many job losses” were inevitable as a result of the economic fall-out from the pandemic. While this is true, bold government action can mitigate both mass unemployment and the coming climate crisis. What is needed is an ambitious green recovery plan that puts people to work and accelerates our transition to a zero carbon economy.

The good news is that the prime minister is thinking along these lines. He recently said we need a “fairer, greener, more resilient” global economy in a video message for COP26, the global climate conference the UK will be hosting in Glasgow next year. What the government now needs is a joined-up skills, jobs and investment programme to turn words into action.

A green recovery plan doesn’t need to be vastly different from Johnson’s “levelling up” agenda. But it needs to be done faster and with fewer roads. Key investments include broadband, electric vehicle charging networks, cycle lanes, pedestrian areas, more trees, electricity storage and retrofitting buildings so they are better insulated and use cleaner energy.

The prime minister should hope for the best, but prepare for the worst. As the furlough scheme winds down from August, firms will start sacking people. Once businesses get into the mindset of thinking their own survival is at risk, cuts may be fast and furious.

There were 8.7m people on furlough at the end of May. Another 800,000 or so would normally leave school or university this year. If half of those on furlough are made redundant and three-quarters of those leaving education don’t get jobs, unemployment could rise from its current level to 7m people. Unemployment rates would be especially high among young people, deprived communities and ethnic minorities.

This would be horrendous: misery for those who get thrown out of work or never got on the jobs’ ladder; a toxic political system; an economy that won’t fire on all cylinders; and less tax revenue to pay for public services in future.

The good news is that a massive amount of work needs to be done to make our economy carbon-free. So we could usefully deploy millions of people on this national effort. These jobs could be spread around the country and lots of them would be suitable for young people.

The autumn will arrive before Johnson can blink. Detailed planning needs to start now – so people’s energies are employed in ways that are useful for themselves and society.

Part of the answer should be to encourage young people to stay in education while the jobs market is tough. The Resolution Foundation, a think tank, has highlighted a series of things that can be done. For example, the government could make it easier for young people to go from school to further or higher education and to do second degrees – and to get funding for part-time or short courses, as many won’t want to lock themselves into multi-year commitments.

The main action, though, will need to be on creating jobs. After the global financial crisis, the government had a scheme, the Future Jobs Fund, which incentivised employers to create new short-term jobs. About 100,000 people were hired this way. Although each job cost the taxpayer a net £3,000, the net benefit to society was around £8,000, according to the Department for Work and Pensions.

This time we need something even bigger. Again Johnson is thinking along the right lines. Last week he promised an apprenticeship guarantee. That’s a good start. But the government shouldn’t just focus on school and university leavers. It will also need a good quality jobs programme for the millions of people who could be thrown out of work.

The country will also need a lot of investment in green infrastructure. The good news is that international investors are increasingly convinced that the world needs green recovery plans. So the private sector can provide the bulk of the capital.

But the government should use a mixture of carrots and sticks to “crowd in” as much private investment as possible. As well as subsidising some projects, it can use regulations to tell companies to speed up the shift to a greener world and carbon taxes to make it more profitable to do so.

All this has an international dimension. We can only stop the planet frying if the big polluters – especially China, America and India – take action. We will also be more able to save our economy if trade picks up, which means we will need a global recovery.

Johnson has a golden opportunity to push for a global green recovery because we are hosting next year’s COP26. The UK also is president of the G7, a group of large, advanced economies next year. We need to argue now that nations should come to the COP26 with their own green recovery plans well under way.

If Johnson sets an example, he won’t just create a fairer, greener, more resilient UK. He will help create a fairer, greener, more resilient world.