Generators, retailers and advocates for British energy lined up this morning to voice disquiet and quiet dismay over chancellor Jeremy Hunt’s tax raises on power companies, as announced in yesterday’s Autumn Statement.
Unveiling tax rises and spending cuts presaging what the Office of Budgetary Responsibility calculates will be the worst-ever drop in British citizens’ living standards – with take-home pay dropping 7% in real terms for each of the next two years, – Hunt yesterday introduced a Electricity Generator Levy, grabbing 45% of power companies’ profits. The “temporary” levy starts in January and will last until 2029.
The Chancellor also upped the Conservatives’ existing windfall levy on oil & gas extractors by 10 points to 35%, extending it by two years to 2028. The clawback was reluctantly brought in in April by his predecessor at the Treasury, Rishi Sunak.
For renewables-based generators, the REA decried Hunt’s moves, claiming they would deter investors.
Frank Gordon, the association’s director of policy, pointed to “a strong need for tax relief for low carbon investments to help stabilise energy prices and offer long-term energy security”.
At Energy UK, advocacy director Dhara Vyas agreed. “The levy will effectively penalise much needed low-carbon generation over polluting fossil fuel extraction, ” said Vyas.
He went on: “A windfall tax on generators lasting six year stands in stark contrast to the six months duration of the European equivalent, making the UK a much less attractive destination for investment.
The chancellor also announced a £6 billion programme of mass home insulation, to be directed by an energy efficiency taskforce. No cash will be available before April 2024, however.
“The added investment into energy efficiency is a welcome move, but action needs to be taken immediately, said the REA’s Gordon. He called home batteries to be included under the list of VAT-exempted Energy Saving Materials.
Vyas was also dismayed. “Energy UK welcomes the government’s ambition to reduce final UK energy consumption by 15% by 2030”, he said, “ but it is disappointing there is no immediate support before next winter”.
For the first time from April 2025, electric vehicles will be liable for vehicle excise duty, better known as road tax.
Coming after the government’s recent withdrawal of cash grants up to £5,000, the REA had expected the move, but worries it may remove incentives to more carbon-free motoring, particularly among van drivers and fleets.
For consumers, the Chancellor extended the Energy Price Guarantee beyond April, with a £500 boost capping next year’s energy bills for a hypothetical ‘average’ home at around £3,000.
Energy UK said that figure would still leave many consumers unable to pay their bills. The government had not responded to the industry’s proposals this year to mitigate bills by offering generators fixed long-term contracts, which would benefit consumers, said Vyas.
Business consumers of energy will be rewarded after April by a revision of the tariff-capping Energy Bill Relief Scheme. Targeting and its support levels remain to be clarified, a point worrying enterprise supplier nPower Business Solutions.
“The uncertainty of what the new Scheme could mean for many businesses beyond this date is hugely impacting confidence” said Anthony Ainsworth, its chief operating officer,
“While the additional funding for energy efficiency is welcome”, Ainsworth went on, “it is still two years away.
“Businesses need more immediate help to implement measures that will both reduce energy demand and emissions, to enable them to invest with confidence.”
The Chancellor’s tax rises seek to raise £25 billion. Another £30 billion in public spending cuts are intended to fill a notional £55 billion hole in Britain’s public finances.
Yesterday in the Commons, shadow chancellor Rachel Reeves for Labour lambasted Hunt’s numbers, accusing the Conservatives of picking the pockets of the nation.
On generation, said Reeves, the Tories continued to block onshore wind that could bring energy bills down. “Clean power is the solution to the energy price crisis, but still the Conservatives stand in the way”, said Labour’s aspirant chancellor.