Labour urged to clip Treasury’s wings by establishing powerful net zero unit

Labour should set up a powerful new unit with powers equal to the Treasury to spearhead efforts to achieve net zero, if it wins the next election, a new report has urged.

The study, by the Energy Research Accelerator (ERA) network of academics, was set up to assess Labour’s plans to establish a public owned energy company which would be known as Great British Energy (GBE).

Yet more important than this, the ERA concluded, is the establishment of a new Net Zero Delivery Unit with equal status to the Treasury and the power to “direct and hold to account” all ministries across Whitehall.

The new body must have “at least parity with the Treasury”, because the latter has a track record of “blocking strategic projects on narrow economic grounds”, it stated.

It should be led by or report to the deputy prime minister and would also have powers over regional and local authorities, Ofgem, National Grid, distribution networks, GBE, the UK Infrastructure Bank (UKIB) and the party’s proposed National Wealth Fund (NWF).

The delivery unit’s remit would be not to devise policy but to make sure existing targets and deadlines are met and to remove delivery bottlenecks, said the study. It added: “The body would be extremely powerful but the idea is not to tie up the entire regulatory and energy system in a ‘year zero’ reform. Rather, it is to add a single body to own the challenge, hold all relevant bodies to account, cut through obstacles and drive delivery.”

The authors suggest that a potential model for the new organisation is the Cabinet Office Delivery Unit, set up by Tony Blair, which it says is widely credited with delivering the ambitious public service reforms during his second term as prime minister from 2001 to 2005.

While broadly welcoming the opposition’s plan to set up the state-owned GBE, the report expresses concern that its proposed remit is “too wide” and Labour expects “too much from it in the short term”. It adds GBE’s potentially sprawling remit could prove hard to manage.

The report further recommends that Labour should not go ahead with plans for GBE to become an investor in early-stage technologies, like hydrogen and tidal power, or undertake generic investment in more mature ones, like offshore wind.

It says the state-owned European energy champions like Vattenfall and Orsted, which GBE is modelled on, earn small profits compared to the social benefits Labour hopes to achieve from setting up GBE.

Instead of taking stakes in new renewable projects, like Labour has mooted, GBE’s remit should be narrowed to the party’s plans to boost council and community generation projects, supporting local area energy plans, and collective procurement of transmission assets.

It further concludes that public ownership is “not the most important factor in achieving either net zero or social equity” and that plenty of private capital still exists that is eager to finance new British renewables if the government can offer sufficiently generous terms in upcoming Contracts for Difference auctions.

The report also concludes that Labour’s plans for the NWF to carry out low carbon investment is unnecessary. These investments could be achieved sooner through the UKIB or directly by the Department for Energy Security and Net Zero.

Other recommendations include imposing much stronger regulation on the distribution network operators, as well as keeping the recently established Great British Nuclear as a separate agency.

Martin Freer, director of the ERA, said: “It is clear that Britain needs to radically improve the way it implements policy and delivers infrastructure projects. Whoever forms the next government will need to introduce a clear industrial strategy for clean energy, and raise the net-zero objective to its highest priority.

“I hope that the findings of our Policy Commission report will help with their thinking and ensure that time and money is directed into the areas that will make the biggest impact.”