Few in business will be entirely shocked to learn that a levy imposed by government has been collected with little idea of how to spend it.

Lem Bingley

Lem Bingley, PW editor

Funding for carbon offsetting across London seems to be a case in point. Since 2016, London councils have been gathering in cash from developers, through Section 106 agreements, to spend on carbon reduction projects across the capital. The fees are charged to cover any anticipated gap between net zero performance and the expected outcome of all major new developments.

Developers are first expected to cut carbon as much as possible through design, construction and specification, and then either fund offsite carbon projects directly or simply pay to offset any remainder at a price per tonne of carbon dioxide set by the local authority.

Cash is ringfenced and must in turn be spent on cutting carbon emissions within the local authority that collects it. That appears to be somewhat harder than it sounds.

As we report this week, figures published this month by the Greater London Authority (GLA) show steady growth in the cash amassed – £88.5m had been collected at the latest tally, and another £154m committed but not yet collected, for a grand total of almost £243m – as of the end of 2022. (Data was gathered by the GLA in the second half of last year, and only published this month.)

Growth in spending has been noticeably muted by comparison, with only £32.2m so far spent on actually reducing carbon emissions. In all, of 35 planning authorities entitled to collect the fee, only 26 had spent any of it by the end of 2022.

Barriers to spending included a lack of suitable projects, a lack of staff or expertise to decide what to spend it on and other administrative issues. Four local authorities said they were waiting to gather sufficient funds for major undertakings.

The GLA has made a series of recommendations about how local authorities might spend the funds effectively, such as seeking co-funding for major projects through other means, or pooling efforts with neighbouring authorities. It added that authorities should “target funds towards energy efficiency, renewable energy, district heating and climate resilience”.

The situation is reminiscent of the Apprenticeship Levy, a charge imposed on larger companies to fund in-work training. Since that levy began in 2017, more than £2.2bn has gone unspent on actual apprentices and instead been swept up by the Treasury.

The rules on how to spend the Apprenticeship Levy have been relaxed over time but clearly not enough to meet the actual needs of real-world employers.

It strikes me that carbon offsetting funds suffer from a similar handicap. Local authorities lack either the imagination or the capacity to spend these sums effectively, which does nobody any good. The money, after all, is supposed to be used to reduce carbon emissions for the benefit of Londoners and the planet.

If the public sector can’t work out what to do, I have an idea: there are plenty of commercial buildings in London where the business case for retrofitting doesn’t stack up. A couple of hundred million in grant funding wouldn’t go amiss.