Boris Johnson: UK 'setting example' for green agenda
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NS&I Green Savings Bonds are to be released by the end of 2021. By saving into these Bonds, Britons will be able to contribute towards sustainable public spending and projects.
Green Projects for 2050
The UK Government has set a target of emitting zero carbon emissions by 2050 and this goal has now been written into law. NS&I explained “green projects” will play an important role in reaching the UK’s targets.
NS&I explained where savers’ money will go: “All money invested in NS&I is passed onto HM Treasury and contributes towards Government spending. Money invested in Green Savings Bonds will also go to HM Treasury and be held in a general account.
“HM Treasury then plans to allocate an amount equivalent to the proceeds raised from Green Savings Bonds, to its chosen green projects, within two years.
“The Government will publish details about how the money is being spent and what the environmental benefits are, so you can see the difference you’re making.”
The money invested will go into six “key areas” the Government is focused on.According to NS&I, these are as follows:
- Making transport cleaner: To reach net zero greenhouse gas emissions by 2050, it’s vital that the UK reduces harmful emissions caused by petrol and diesel vehicles and other transport. This is a significant area of green spending.
- Renewable energy over fossil fuels: Green spending in this area will focus on projects that help us move away from our reliance on fossil fuels in favour of renewable energy, such as wind and solar power.
- Preventing pollution: Green spending in this area will focus on recycling projects and technology that captures and stores carbon from the atmosphere. Helping cut down and control the amount of pollution that we produce as a society.
- Using energy in a more efficient way: One way to achieve net zero by 2050 is by being smarter with the way our energy needs are met. Green spending in this area will include making older buildings more efficient to make sure less energy goes to waste.
- Protecting natural resources: Green spending in this area will, quite literally, look after the green stuff. Projects that help protect the environment, the countryside and areas of natural beauty.
- Adapting to a changing climate: Green spending also means looking out for the threats associated with the warming of the planet. Helping us, as a society, adjust and prepare for the future ahead.
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What interest rates will be available?
NS&I has yet to announce what rates will be available but other product details have been shared. Its Green Savings Bonds will be offered on a three year fixed-term and they’ll be available to buy online.
Savers will have “the opportunity” to invest between £100 and £100,000 in the Green Savings Bonds. Once they invest, they won’t be able to access their money until it reaches the end of its term.
While details on the interest rate have been scarce, Laith Khalaf, head of investment analysis at AJ Bell, highlighted the Chancellor may announce more details next week.
“The Chancellor has also committed to launching a green NS&I savings bond this year, and we could well see Rishi Sunak announcing the interest rate in this Budget, in much the same way George Osborne did with the NS&I Pensioner Bonds in 2014,” he said.
“The launch of a three year green savings bond, backed by the Treasury, will be a welcome addition to the UK cash market, and will give savers a place to park their money and do their bit for the environment at the same time.
“However, the question of what rate to pay is politically charged. Too little, and it will disappoint savers, and could lead to a product flop, particularly when the potential for interest rates to rise is already likely to deter savers from locking their money away for three years. Too much, and clearly questions will be asked about the cost to the taxpayer, particularly when taxes and the cost of living are on the rise, and Exchequer resources are stretched to the limit.”
In late September, Mr Khalaf warned the Government could face an uncomfortable burden if it offers a particularly high rate. At the time, the market leading rate available for three year cash deals sat at around 1.8 percent and Mr Khalaf examined what could happen should NS&I match that.
“If NS&I issue their £15billion green bond with a market leading rate of 1.8 percent, that would cost the taxpayer around £210million a year, at a time when Exchequer coffers have been drained by the costs of the pandemic,” he said.
This would cause an “uncomfortable friction” for Mr Sunak according to Mr Khalaf’s analysis.
Mr Khalaf concluded by examining other options available to the Government: “The Government could borrow money for its green infrastructure spending plans through the gilt market instead of through NS&I.
“The current rate of Government borrowing for a three year gilt is just 0.7 percent , and that compares to an interest rate of 1.8 percent on some of the best deals for three year savings products on the cash market.
“On the £15 billion of borrowing the NS&I will be raising through the green bond, closing that rate gap could end up being a significant cost to the taxpayer. If the Chancellor offers a market-leading rate, he will be open to accusations of buying green credentials with taxpayers’ money.”
NS&I details it will have “plenty of news to share” about its Green Savings Bonds in the coming weeks and months and to keep on top of this, savers are advised to regularly check back in with its website.
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