U.K. Revives Industrial Plan Unseen Since Margaret Thatcher

1468520860_Theresa-May

Theresa May, U.K. prime minister.

Photographer: Simon Dawson/Bloomberg
  • Energy and climate ministry merged with business department
  • Greg Clark seeks affordable energy and climate solution

Theresa May took a step toward delivering the U.K.’s first industrial strategy since Margaret Thatcher ruled in the 1980s, combining the government departments overseeing business, energy and climate change.

The prime minister, who replaced David Cameron Wednesday, merged the Department of Energy and Climate Change and the Department for Business, Innovation and Skills into a new ministry dubbed the Department for Business, Energy and Industrial Strategy. She named former local government minister Greg Clark as its leader.

The decision is aimed at helping the Conservative government balance the need to attract 100 billion pounds ($133 billion) in investment to keep electricity networks running after 2020 with consumers’ demands for lower bills and targets set down in law to reduce pollution. Previous governments isolated energy and climate policy from the broader business department, which also oversees scientific research and labor policy.

“The big move in U.K. political terms is back to having an industrial plan, which we haven’t had since the 1980s,” said Michael Liebreich, founder of Bloomberg New Energy Finance and a Conservative Party supporter. “It will be a decarbonization plan for the U.K. economy. There’s only so much you can do from within energy and climate if there are countervailing forces within your business strategy.”

Opposition politicians condemned the move, saying it would unsettle investors considering whether to finance new power stations. The government has sought to persuade Electricite de France SA to invest more than 18 billion pounds in the first new nuclear power station in a generation at Hinkley Point in the southwest of England.

Oppostion Concerns

Former Labour leader Ed Miliband called it “plain stupid,” suggesting that the move downgraded climate as a priority. He was the first head of the Department of Energy and Climate Change when it was formed in 2008 and said, “Climate not even mentioned in new dept. title. Matters because depts shape priorities shape outcomes,” he said on Twitter.

With more than a dozen power plants due to close in the next decade, the previous government worked to lay out incentives that will draw in money for new electricity infrastructure.

“The immediate impact of the vote to leave has been to amplify uncertainty at a time when major investment is needed to deliver affordable, clean and secure energy,” Angus MacNeil, a lawmaker from the Scottish National Party who leads the Parliament panel on climate and energy, said in a statement.

Industry Responds

Yet representatives of the renewable energy industry said they were confident they would continue to thrive. The abolition of DECC was discussed before the 2015 general election and now is a “convenient moment” for it to happen, said Peter Atherton, an associate at Cornwall Energy.

The U.K. will invest over 20 billion pounds in wind energy in the next five years, Hugh McNeal, chief executive officer of RenewableUK, said in an e-mailed statement.

“Energy is the big ticket item in British infrastructure spending. Industry is ready to invest and it is vital for our economy that this work continues,” he said.

Thatcher’s Hand

While previous governments set out policies on steel, energy, transport and climate, the U.K. has stepped away from a coordinated strategy since Thatcher deregulated industry in the 1980s. The result sometimes produced conflicting signals to business -- such as a climate change levy designed to cut pollution that also drove up electricity costs.

“The combination makes a lot of sense,” said Victoria Cuming, a policy analyst at Bloomberg New Energy Finance. “One example would be reconciling high power prices, an export-led industrial strategy, the need to address climate change and the demands of energy-intensive industries like steel. Another would be how to help existing industries such as car-makers sell into world markets influenced by clean air targets.” 

In some ways, the name above the door of the civil service department doesn’t matter, Juliet Davenport , chief executive of renewable energy company Good Energy Group, said in an e-mailed statement. 

"But now the government needs to prove that climate change isn’t slipping down the agenda,” Davenport said. “I want to see concrete action to transform our energy system and clear policies for meeting the UK’s decarbonization commitments."

“It is critical that the new Secretary of State for Business, Energy and Industrial Strategy ensures that climate change policy is integral to industrial and energy strategy, said Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, which represents 122 investors with more than $14.4 trillion of assets under management, in an e-mailed statement.

Brexit Impact

The decision by voters last month to exit the European Union frees up May to pursue more aggressive intervention in industry -- including subsidies and tax breaks currently restricted under common market rules. Clark said his ministry would tie together solutions for a number of issues.

“I am thrilled to have been appointed to lead this new department charged with delivering a comprehensive industrial strategy, leading government’s relationship with business, furthering our world-class science base, delivering affordable, clean energy and tackling climate change,” Clark said in an e-mailed statement.

Clark, 48, was previously the Secretary of State for Communities and Local Government. When the Conservatives were in opposition, he was their energy and climate change spokesman and would have moved to that department in government had the Tories not gone into coalition with the Liberal Democrats, who took control of the ministry.

“He understands climate change,” said Richard Black, head of the non-profit Energy and Climate Intelligence Unit. “He now has the opportunity to align British industry, energy and climate policy in a way that’s never been done before.”

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