Last year Britain’s flagging economy may have dodged a bullet by narrowly avoiding a recession. But with recent figures showing GDP sliding towards negative territory, recession fears persist. The likelihood of another recession is now higher than at any time since 2007: the question is no longer a matter of ‘when’ is the next economic downturn coming, but what to do once it strikes?
In a new paper for the New Economics Foundation we argue that the failure to respond to the last recession by scaling up zero-carbon investment was a huge missed opportunity. Our calculations suggest that if just one third of the coalition government’s tax cuts between 2010 and 2013 had instead been used to fund a mass home insulation programme, emissions from UK homes would be at least 30% lower today. After just three years, the energy savings to household bills would amount to the underlying cost of the programme.
A clear lesson that the recovery from the financial crisis taught us is that economic policy can be too small, too short-sighted and lacking the right focus. Amidst the policy chaos that immediately follows a crisis, policymakers invariably have to make decisions within weeks, if not days. But such decisions can dramatically shape the future direction of the economy.
