Climate Change and Household Finances in the UK

30 January 2024

Climate change threatens many aspects of our living standards in the UK, from the resilience of our homes to cope with extreme weather to our food security. Deep financial inequalities in the UK mean that these risks will particularly affect people here with the least financial resources. Clearly, the living standards of people on low-to-middle incomes should be at the forefront of national climate change conversations and policies.


With this in mind, the Financial Fairness Trust has launched a new funding programme, “Climate Change and Household Finances in the UK’. We aim to fund more research, policy work and campaigning activities that will protect and improve the finances and living standards of people on low-to-middle incomes as the UK works towards meeting its climate pledges and ongoing climate threats. As well as making grants for research, policy and campaigning in this programme, we hope to bring stakeholders working on climate and environment on the one hand, and living standards on the other, closer together to make effective policy.


The UK has international commitments in place now to combat climate change. We are signed up to: ‘Net Zero’ (no longer adding to the total amount of greenhouse gases in the atmosphere) by 2050; limit global temperature rises to 1.5C by 2100; and achieve a set level of emissions reduction to meet by 2030 compared with 1990 levels. It is likely we will need to go further. The Institute for Fiscal Studies points out that while the UK has moved forward towards net zero target, progressing further than other high-income countries, the country is “running out of low-hanging fruit” in terms of policy options. Next steps could be painful for households, particularly people on low to middle incomes.


How UK governments deliver their commitments – alongside the policies of the devolved governments – can be a threat or opportunity in relation to the living standards of people on low-to-middle incomes. On the one hand, adjustment could raise costs of essential goods and services, deplete savings and impact jobs and income, even deepening poverty for some. And it could undermine UK climate objectives if we don’t do enough to make sure everyone can afford and access the required innovations.


On the other hand, adjustment could ultimately lead to household savings, cheaper outgoings and green jobs with better conditions and pay. In some cases, households may stand to save money in the future, but usually only once initial adjustment costs are met, such as installing energy efficient technology.


At the moment, and looking towards the forthcoming election, all the major political parties have policies to meet Net Zero but are under pressure to rein in public spending, and some commitments are under scrutiny.


Central government climate adaption initiatives have not always been fair or effective for people on low-to-middle incomes. For instance, the structuring of green levies within energy bills mean many lower-income households pay a higher percentage of their income towards these levies than higher income households, compared to if the levies were funded via general taxation (Green Alliance, 2022).


Another example, the 2021 Green Homes grant voucher scheme to deliver home energy efficiency installations is judged to have missed the mark because it was overly complex, and was run across too limited a time frame for installers to meet demand. Transition support schemes and mechanisms do not always reach or incentivise people across different tenures such as lower-income owner-occupiers, or the landlords of low-to-middle private rental tenants.


The Scottish government has committed to reach Net Zero by 2045 (five years early), earmarking £245m across green jobs, training and transitions, and establishing a Circular Economy Bill, a Just Transition Commission, and with Wellbeing Economy aims. But timely delivery and implementation will be key.


There are great initiatives out there to build on, for example: Resolution Foundation’s Economy 2030 funded by the Nuffield Foundation; and Green Alliance's work on making sure low-to-middle income households benefit from climate transitions. At the Trust, we are already working with two partners on grants addressing climate change and living standards. E3G coordinates campaigns, research and engagement to mitigate the cost-of-living crisis through warmer, energy efficient homes. This type of work from them and others has likely contributed to some recent positive changes from the Government, such as the further investment of £1billion in the Great British Investment Fund. On transport, Sustrans is exploring if the extension of cycle schemes to those on lower incomes who are currently excluded from them will be viable, attractive and beneficial to the environment.


For funding, we have identified key areas. Adapting UK transport infrastructure towards greener transport, in particular affordable and accessible public transport, could reduce costs for low to middle income households. We are interested in what green, fair taxation for vehicles and roads should look like.


There will be opportunities to advocate for better paid work, with improved conditions in industrial transitions to ‘green’ jobs from ‘brown’ jobs. Training recommendations might ensure the UK has sufficient workers with the correct skills in the correct places to enable our climate transition – as well as ongoing skills training after the transition has taken place.


Proposals would be welcome on how to make household energy shift schemes effective, targeted fairly, and appropriate to housing tenure. There is scope to understand how decommissioning the gas grid could be done in ways to protect low-income consumers.


And consumerism is now an urgent carbon-reduction issue in the UK, beyond financial hardship and debt. Ideas might address generalising a more circular economy for all, or regulating goods for a ‘right to repair’ so that build-in obsolescence is reduced. People on low-to-middle incomes will need access to goods and services in line with social expectations for decent living standards and to cope with climate-related risks such as floods or heatwaves.


Our interest here, as across our work, is the structural and political barriers that prevent people from enjoying good living standards, and the opportunities for change, rather than the behaviour of individuals or funding the delivery of services. Our Climate Change and Household Finances in the UK funding will run alongside our annual grant rounds in 2024, and we are looking forward to receiving proposals.


Full details of the funding programme can be found here, to be read alongside our established funding guidelines. Please contact before you make an application to the Climate Change and Household Finances in the UK programme.