Policy briefing: How the machinery of government can accelerate the UK’s transition

This briefing focuses on refinements to the machinery of government to stimulate an enabling environment, in the UK context.

Economic transition policy creates the favourable conditions investors need to catalyse investments and align stewardship with sustainability goals. This includes supporting capital allocation towards low carbon or sustainable solutions as well as the avoidance of harmful economic activities. The make-up of an enabling policy environment is vast, but this briefing will focus on refinements to the machinery of government to stimulate an enabling environment, in the UK context.

The UK has been a pioneer in developing robust climate legislation, with the 2008 Climate Change Act introducing legally binding greenhouse gas (GHG) emissions targets (Carbon Budgets) every five years and establishing the independent Climate Change Committee (CCC). The UK has committed to reach net zero by 2050, and this target was enshrined into law in 2019. Successive governments have reiterated that pledge and developed Carbon Budgets and net zero strategies to support that objective.

Yet, while the UK’s architecture around long-term targetry and evidence-based policy making is robust, numerous challenges lie in its delivery and implementation. Structural barriers persist – limited fiscal headroom, fragmented accountability, and under resourcing across departments constrain effective delivery and implementation. Without coordinated policy signals, regulatory uncertainty remains and markets cannot fully mobilise the capital required to meet domestic net zero goals.

To support the UK’s transition to a net zero economy, machinery of government shifts are required. Machinery of government will refer to how government is organised, coordinated, and empowered. It ranges from setting out the strategic direction, enabling finance, and delivery mechanisms, which all need to be interconnected and geared towards achieving a specific goal. Embedding transition delivery into the core of government could future-proof climate progress against political shifts and ensure economic resilience. This requires also tackling ambiguity across regulators’ mandates and weak integration of climate priorities into fiscal decision-making, which reduce coherence and accountability.

Institutional architecture can align government, business, finance and society around shared sustainability goals, problem solving, and drive coordinated action. This goes beyond ensuring adequate resourcing within government and requires strategic planning on sustainability issues and policy integration across government departments.

The PRI’s four main recommendations on achieving this vision cover sectoral pathways, the budgetary process, public-private partnerships, and delivery mechanisms. On the sequencing of actions, the priority should be to provide strategic direction at sector level, via sectoral pathways that outline decarbonisation, technology development, and finance needs. Sectoral pathways could then cascade into the budgetary process, public private partnerships, and delivery mechanisms, providing coherency and clarity to investors.

Sectoral pathways

Corporate and financial institutions need sectoral pathways that align with the UK’s legally binding short, medium, and long-term targets. These should provide investors with the necessary detail as to how key sectors of the UK economy will transition, and by when.
Formalise mechanisms, such as the Transition Finance Council, for structured collaboration between the private sector and government. Institutional oversight with clear cross governmental authority.

Budgetary process

The Budget should include an explicit Transition Alignment Statement to showcase how fiscal measures align with the UK’s Carbon Budget and sectoral pathways.
Government decisions on the Budget, spending, tax, and subsidies should be stress tested for their impact on the transition.

Public-private partnerships

Stronger inter-departmental coordination within government would ensure that climate targets are incorporated when designing tax, subsidies, or departmental budgets.
Blended finance projects should be consistent with sector roadmaps to decarbonise, wider government priorities, as well as being factored into the annual budgetary process.
A multi-year funding commitment from HM Treasury would offer certainty to investors, with a long-term planning lens on the pipeline of projects.
A single coordination unit with oversight of the projects could help simplify the public investment landscape.

Stronger delivery mechanisms set up from the outset

Mission Control, tasked with turbocharging the government’s mission on cheap and clean power by 2030, could be replicated more broadly to support other priority sectors to transition, with clear feedback loops.
Delivery units could be tasked with developing aligned policy tools with impact assessments, clear implementation routes, and regular review cycles to measure policy effectiveness.

This briefing is part of a broader workstream on the enabling environment for the economic transition. Beginning with the case for a whole-of-government policy reform which sets out what is understood by a sustainable, just economic transition, and presents a high-level framework to support governments in pursuing such a transition. We have coupled this with strengthening the investment case for the economic transition, in collaboration with signatories and investor initiatives.

This has been followed by country-focused analysis including:

Read the full briefing below.