Climate inaction will destroy Europe’s public budgets Without early investment in mitigation and adaptation, families and businesses will face rising costs while states are forced into consistent emergency spending.

Climate Inaction Will Destroy Europe’s Public Budgets

By @sebmang.bsky.social and @jayasood.bsky.social from the @neweconomics.bsky.social in @greeneujournal.bsky.social

www.greeneuropeanjournal.eu/climate-inac...

“It’s hard to square senior Bank of England officials stating that climate has fallen down the list of priorities, whilst in the same breath describing it as an existential threat with risks now materializing on firms’ balance sheets.”

Our Sr. Policy Manager in Bloomberg 👇
www.bloomberg.com/ne...

Families to save in biggest home upgrade plan in British history Government launches Warm Homes Plan to upgrade the nation's homes, help families cut their energy bills, and tackle fuel poverty.

Very pleased to read the PR for the Warm Homes Plan this morning.
The best insurance against energy price volatility is a solar + battery combo for a household. So it's excellent to see an ambition of tripling rooftops with PV. Combine it with a battery and its magic!
www.gov.uk/government/n...

Holding interest rates is not the way to go. That will hamper economic activity and hammer millions of people with mortgages and loans. We need to see rates come down. Monetary Policy Committee will likely again be divided on the Feb decision.

We have a BoE interest rates decision coming up on 5th Feb: unemployment is increasing and is at 5.1%, wage growth is slowing. Inflation is being driven by one-off air fare oddities + the UK's unique exposure to supply shocks + and administered prices that won't drop out the numbers til April.

And (2), supply-shock-driven food and energy prices still feed through to core inflation, indirectly, as they serve as inputs to businesses across sectors.

And yesterday's data showed wage growth slowing in the three months to November to 4.5%, down from 4.6% in the three months to October.

The problem with that is (1) services inflation recently is not all about labour costs - and has been largely driven by jumps in regulated/administered prices from April 2025 (so y-o-y inflation starting before that incorporates the jump) that are in government's control.

What does this mean for interest rates? BoE looks to: (1) labour-intensive services inflation for a sense of how much increases are driven by labour costs, thus warranting rate hikes; and (2) core inflation excl. food + energy to try and see past supply-shocks that hikes won't address.

Price rise in air fares this time last year were the third lowest since 2001, hence the jump up this year. And whereas last year, most long haul flights' scheduled landing was New Years Eve, this time around most landed a day earlier - so more expensive flights captured in the Dec data this year.

Inflation up again, from 3.2% in Nov to 3.4% in Dec, just as it seemed we might be on a downward trajectory. Mostly driven by alcohol & tobacco + air fares, so arguably not the bare essentials. But food prices are still climbing.

We're entering a new era where inflation will be caused by global shocks - and raising interest rates will not do much to address it, says @jayasood.bsky.social on LBC News.

Bank of England urged to do more to tackle climate crisis Environmental groups mark 10 years since Mark Carney’s ‘short-term horizons’ speech with plea to act ‘while there’s still time’

We must invest in addressing the climate crisis for economic stability. BoE has it's role to play in that, just as govt has it's role to play in tackling inflation theguardian.com/business/202... 4/4

Have you wondered why the price of some chocolate has increased so sharply in the past few years? I had the pleasure of discussing this yesterday morning. (Please excuse the blinking, my body was… |... Have you wondered why the price of some chocolate has increased so sharply in the past few years? I had the pleasure of discussing this yesterday morning. (Please excuse the blinking, my body was tr...

But we can't rest on our laurels. Food inflation temporarily slowed in Nov yet the climate crisis will increasingly impact production at home and abroad - see Christian talking about chocolate: linkedin.com/posts/christ... 3/4

No doubt government interventions on the CoL this budget (energy bills, rail fare freezes) will help the downward trajectory into 2026 (OBR forecasts 2.5%), hope to see more of this (mon-fisc coordination in inflation-fighting) in future 2/4

UK Nov CPI inflation at 3.2% down from 3.8% over the summer and 3.6% in Oct, amidst economic contraction, a rise in unemployment and slow wage growth. No excuse for BoE not to cut rates tomorrow 1/4

@neweconomics.bsky.social

Closing the gap - The case for a public investment target - Invest in Britain

5/5 It's a move towards better coordination. Lower inflation means BoE can cut rates, lowering the cost of green investment and mortgages. Lower interest rates means lower government borrowing costs - opening space for the investment we desperately need: investinbritain.org.uk/resource/clo...

4/5 Government has also recognised the need for stronger regulation on specific dysfunctional markets - like dentistry - to bring down costs. Another nod to the relative efficacy of government policy over general interest rate policy for targeting specific sector cost issues.

3/5 ...although cutting energy bills must not come at the cost of better insulating and retrofitting out homes - more on this (ECO etc) in another thread.

2/5 High interest rates can't bring down energy price spikes caused by geopolitical conflict and the UK's overreliance on gas. Yet energy costs feed through to almost all other prices. Fiscal policy is better suited to tackling this - government now rightly recognises this.

1/5 Government recognising this budget that the Bank of England can't solve inflation alone is a step towards stronger monetary-fiscal coordination that NEF has been calling for some time: t.co/yc4IEFFamD

After years of austerity and a prolonged cost-of-living crisis, households are really struggling. Investment is essential. The Chancellor's budget must provide the support needed.

NEF's senior economist @jayasood.bsky.social on @lbc.co.uk.

The new national wealth fund could raise £100bn of private finance - here's how Empowering the new national wealth fund to issue green bonds on private markets, could leverage £14bn of private sector investment for every £1bn of Treasury funding

As @theoharris.bsky.social set out last year - the NWF could raise £100bn by issuing its own bonds:

--> neweconomics.org/2024/10/the-...

The NWF has the potential to deliver huge benefits for the UK economy, it's time for a step change in ambition!

UK Wealth Fund Unlikely to ‘Shift the Dial’ on Growth, MPs Warn Chancellor of the Exchequer Rachel Reeves’ attempt to boost growth by luring in private investment through the National Wealth Fund will be held back by its limited size, an influential group of Briti...

Not only would this enhance the NWF's independence from the Treasury when funding projects, but will grant it more space to grow in scale & ambition and have serious impact - it is currently miniscule relative to international comparators:

www.bloomberg.com/news/article...

Great to see that following my colleague @chaitanyakumar.bsky.social's oral evidence session in June, the Treasury Select Committee has endorsed our recommendation for the Treasury to explore the merits of allowing the NWF to borrow funds directly from the market.

bit.ly/4oaCGhM

Why Rachel Reeves Faces A Very Tricky Autumn Budget The Chancellor is walking an economic tightrope heading into the Autumn Budget.

"In the UK, these fiscal events have unfortunately become a scramble over how to fix a short-term, arbitrarily determined, so-called 'fiscal black hole."

@jayasood.bsky.social on the upcoming autumn budget in @politicshome.bsky.social
www.politicshome.com/news/article...

Unless the fiscal framework changes, the UK is stuck in a doom-loop: low growth, high yields, eroding credibility. The Autumn Budget must deliver bold policy *and* reform the institutions that shape the prevailing narrative to foster more confidence in the UK economy.

This would let the Chancellor openly challenge OBR assumptions, providing it more weight in shaping the prevailing narrative.

By removing the straitjacket on the chancellor without undermining accountability, the UK could gain space to invest and rebuild confidence.

A democratic fiscal framework Transforming the Office for Budget Responsibility into the Office for Fiscal Transparency

But what if the 'prevailing narrative', and therefore market pricing was not so dominated by narrow & contested OBR assumptions? We propose an Office for Forecast Transparency, with a diverse panel of 9 economists ruling on fiscal sustainability.

neweconomics.org/2025/08/a-de...