The Government unveiled its Autumn Financial Statement today, placing tax increases firmly at the forefront despite the rising cost of living and recession which is gripping the UK. Alongside the bleak backdrop, the Chancellor of the Exchequer, Jeremy Hunt, also made a number of key announcements aimed at boosting the UK’s green economy.
With wholesale gas and electricity prices now around eight times higher than the historic average, the Chancellor was clear that the economic outlook due to ‘global headwinds’ is weaker in some countries, including Germany, and emphasised the Government’s willingness to take tough decisions to drive change. Whilst the measures outlined amount to £55bn in additional public finance, only half of this will come from spending cuts and efficiencies with the remaining half from increased taxes.
Despite the bleak picture, the Chancellor committed focus of economic growth in energy, infrastructure and innovation and asserted that the UK “remains fully committed” to COP 26 Climate Agreement made in Glasgow in 2021.
Key messages delivered include the previously announced plan to modify the energy price cap applied to both business and home energy costs from April 2023. It was therefore no surprise that the announcement of price increases was announced of around £600 in April 2023 per household to an estimated, to £3,100 per annum. The intention of maintaining this for up to three years if necessary is welcome as is the additional support pledged for the more vulnerable members of society. There will also be a new approach for business energy in April 2023, but no details were given.
Jeremy Hunt stated that ‘Cheap, low-carbon, reliable energy must sit at the heart of any modern economy. But Putin’s weaponization of international gas prices has helped drive the cost of our national energy consumption right up. This year, we will spend an extra £150bn on energy compared to pre-pandemic energy.’ He expressed determination that the UK will not be left at the mercy of international prices, stating that ‘energy independence combined with energy efficiency’ was vital to combat the risk of ‘bankrupting our economy and harming our planet.’
The Chancellor outlined a new ambition for the UK’s buildings and industry to reduce energy consumption by 15% against current levels bringing savings of circa £28bn annually. This will be delivered utilising the funding previously pledged to spend £6.6bn on energy efficient buildings this Parliament. The Treasury is in the process of creating an Energy Efficiency Taskforce to oversee the design and allocation of future funding schemes.
Jeremy Hunt also confirmed that the Energy Profits Levy, applied to oil and gas producers, will be increased from its current 25% rate to 35% from 1 January 2023 and will remain in place until March 2028. At the same time, the tax reliefs available to these firms will be reduced from 80% to 29% for all expenditures except spending related to decarbonisation profits. Alongside this, a temporary windfall tax of 45% is being applied to all electricity generators on the same date.
To accelerate the UK’s progress on increasing renewable electricity generation capacity, Mr Hunt confirmed that Sizewell C has now been approved subject to final Government authorisation and stated that the relevant parties will sign this off in the coming weeks.
Vehicle tax reform was also addressed given that the OBR forecasts that half of all new vehicles will be electric by 2025. To maintain the income stream, electric vehicles will no longer be exempt from vehicle excise duty.
The confirmation that the UK is adopting austerity measures to counter the current economic crisis was unsurprising and Jeremy Hunt gave a clear message that the UK must ‘act radically or risk bankrupting our economy and harming our planet.’ The need to act to protect the most vulnerable is clear. What was disappointing was that measures that bring additional funding did not going far enough to deliver more funding for energy efficiency measures and to facilitate the required commitment to net zero.
The WWF Director of Advocacy and Campaigns, Becky Spencer, stated that ‘there is no economic security on a dead planet,’ a stark reminder of the environmental emergency which is being overshadowed by the financial crisis. What is needed to bring about long term and sustained recovery, is accelerated action in energy independence and efficiency. The financial statement went some way towards this, but braver action was needed if we are to combat both risks to our future and it was disappointing that more courage was not demonstrated at this crucial point in time.