Chancellor Jeremy Hunt & premier Rishi Sunak are reported to be eyeing deeper first windfall taxes on renewable generators, as they attempt to plug a gap in public finances estimated at between £ 45 billion and £ 60 billion.
The Bank of England raised its official interest rate to 3.0% this morning, up 0.75%, the highest single rise since 1989, and pushing the nation’s cost of money to its dearest since 2008.
Threadneedle Street’s intervention followed a report in today’s Times newspaper that the chancellor and prime minister agreed yesterday that low carbon suppliers can no longer escape a wider fiscal clawback on revenues racked up due to renewables tariffs’ increasingly unjustifiably links to the rocketing input costs of wholesale gas.
According to the report, the pair want to maximise revenues from the windfall tax –launched as the Energy Price Levy by Sunak in May while still chancellor – by upping its rate by 5% to 30 %, extending its duration by two years to 2028 and expanding the scheme to cover electricity generators.
The Times cites unpublished Treasury estimates suggesting this approach would boost by take from the levy by 50%, reaching £40 billion.
Future gas prices, heavily dependent on developments in the Ukraine war, inject a heavy dose of uncertainty into that final yield, Treasury insiders warn.
Hunt and Sunak will submit their plan on Friday to the OBR’s scrutineers, before Hunt finally delivers his autumn statement on November 17, three weeks later than anticipated.
Estimates of the unfilled gap in public expense range from £45 to £60 billion. The prime minister is understood still to be undecided on two more potential big fund-raisers, either breaking the ‘triple lock’ on pensions, and or cutting the real value of benefits, against a backdrop of double digit consumer price inflation.
Responding three weeks ago to the government’s new Energy Prices Bill, the Renewable Energy Association warned the bill’s ‘cost-plus revenue’ limit, even if imposed temporarily, would deter investment in low-carbon generation.
Equal treatment for renewables retailers
The REA’s head Dr Nina Skorupska, said last month: “This policy risks undermining investment and certainty at just the time when record investment is needed”.
“Any measures on the renewable energy and clean technology generators must be commensurate with those on oil and gas companies”, Skorupska added.
“They face a 25% profit (not revenue) levy but one they can offset against investment. The REA calls on Government for the same investment support for renewables”.
Meanwhile D-BEIS claims measures now enacted under the government’s Energy Bill Relief Scheme could see tariff costs for corporate buyers halved against expected rates over the next six months.
New support prices kicked in on 1 October at rates of £211/ MWh for power, compared to a projected price of £600, plus a revised £75 per MWh for gas compared to a projected winter price of £180 per MWh, are offered under the EBRS, says the ministry. Imposed at appropriate volume rates, the rebates will appear on bills this month.
Grant Shapps the new energy secretary, said: “Seeing the savings from our energy support in bills will give businesses across the country peace of mind at a time when they are facing increased pressure.
“By shielding them from a massive increase in energy costs we’re protecting jobs and livelihoods, just as we did throughout the pandemic – ensuring UK businesses do not fall at the hands of Putin.”
If the Government decides that renewable energy generators need to pay more tax, maybe a good way to generate more income.
However when and how will that extra income be used to lower the energy costs for end users? Have I missed something somewhere.?