OBR Assess The Cost To Govt Of Net Zero

By Paul Homewood

 

As part of their latest “Fiscal risks and sustainability – July 2025” report, the OBR have updated their estimated of Net Zero’s cost to the Public Sector:

 

 

https://obr.uk/frs/fiscal-risks-and-sustainability-july-2025/#es

It has widely been misreported as costing taxpayers £800 billion – for instance the Telegraph here. This is misleading because about two thirds of that number is loss of fuel duties and other fossil fuel taxes.

While that will create a black hole in government finances, it is not per se a “cost”. In any event it will inevitably be offset by other taxes.

Taking out this loss of revenue, the actual cost to the public sector is estimated to be £257 billion over 26 years, at current prices. Using the OBR’s high end scenario, that cost could be 50% higher.

It must be stressed at this stage that:

a) It only covers government expenditure; it does not include all of the extra costs which will be incurred by the private sector.

b) It also does not include the current costs already being incurred subsidising renewable energy, currently running at around £20 billion a year. Some of this, of course, is already a cost to the Exchequer, as the public sector is a major consumer of electricity.

As always seems the case with official forecasts, it is jam tomorrow! Supposedly these costs will start to rapidly decline in the 2040s. Only a fool would believe that, but it matters little because it is the immediate future that concerns people – not twenty years time, when half of us will not even be here!

In the next ten years, for example, the Government will have to find £136 billion, either from taxation, reduced spending or borrowing. None of these are sustainable options.

Neither will there be any tangible benefits which might help to pay for it. It is misleadingly referred to as “investment” by the OBR. But the definition of that word is:

the commitment of resources, usually money, with the expectation of future returns or benefits. It’s the act of allocating capital with the goal of increasing its value over time.

Little of the expenditure planned on Net Zero will ever make a return. The OBR list the main items:

The costs are almost certainly understated anyway, as the OBR admit they have used the Climate Change Committees fake assumptions, including wind and solar power costs much lower than latest CfD strike prices and EV price parity with petrol by next year. Replacing government cars with electric, for instance, will cost much more than the OBR is reckoning on.

Note also that the OBR estimates do not include the £100 billion cost of upgrading the power grid, which means it will be added to energy bills.

Although this report is relevant for government finances in the strictest sense, the OBR really do need to properly audit and analyse the whole economy costs of Net Zero, rather than naively taken the CCC at their word.

Apart from anything else, a collapsing economy in itself will have drastic implications for government finances.

The two things are intricately bound together.

The OBR say one of their jobs is to assess the long-term sustainability of the public finances. They cannot do this properly without assessing the true cost of Net Zero.