Chancellor Jeremy Hunt unveiled the Government’s Autumn Statement yesterday, containing a commitment to boost the energy efficiency of buildings, as well as a windfall tax on the generation of renewable electricity and an end to the tax exemption for electric vehicles (EVs).
The Chancellor’s plan also features a number of measures designed to “tackle the cost-of-living crisis and rebuild our economy”, including:
- An increase on minimum wage from £9.50 to £10.42 an hour from April 2023
- A cut in tax-free allowances for dividend and capital gains tax
- An increase of £3.3bn a year to the NHS budget and £2.3bn for schools
- An extension to the freeze on income tax thresholds, NI and personal allowance
- £13.6bn worth of support on business rates, over the next five years
- A reduction in the threshold at which the 45p top rate of income tax is paid, from £150,000 to £125,140, applicable from April next year
Energy featured heavily in the Chancellor’s announcement, with Mr Hunt extending the household energy price cap for 1 year beyond April 2023, amended to £3,000 a year, instead of £2,500.
In a move welcomed by many, the windfall tax on oil and gas firms will be increased from 25% to 35% from January, however a new 45% tax will be applied to companies achieving revenues of above £75/MWh via the generation of renewable electricity. It is understood that exemptions will apply to small generators, as well as projects under the Contracts for Difference (CfD) programme.
Figures from the clean energy sector, have pointed to the negative impact this new tax could have on future investment, as well as the “unfair” comparison with the levy on oil and gas profits.
RenewableUK CEO Dan McGrail said:
“The windfall tax “risks deterring investment” for renewables generators “at a time when the Chancellor should be incentivising clean energy”, and that renewable generators “will get no tax relief and will be hit by a higher windfall rate” than that imposed on oil and gas companies.
The Director of policy at the REA, Frank Gordon, shared these concerns:
“While the REA and its members recognise the immense economic challenges facing this country, we would question the wisdom of subjecting the cheaper, greener renewable power sector to a more punishing tax system than its oil and gas counterparts.
“We note the exemption for smaller sites, but I would strongly urge the Government to fix this disparity as there is a strong need for tax relief for low carbon investments to help stabilise energy prices and offer long-term energy security. This is crucial for getting investments in renewables moving again following the pause that resulted from the last few months of political and policy uncertainty.”
In a move to slash emissions and boost energy independence the government will reportedly invest £6bn into energy efficiency measures in buildings, with the aim of reducing energy use in the UK by 15% by 2030. Plans were also unveiled to establish an “energy efficiency taskforce” to support this aim, with a further announcement expected “shortly” from BEIS. This added financial commitment to energy efficiency has been welcomed by many, but concern has been expressed that the planned 2024 start date involves an “unnecessary delay”, given the actions required now to reduce bills.
Nuclear power also featured in the plan, with the Chancellor confirming Government’s intention to move forward with the plant at Sizewell C in Suffolk and stating “we need to go further, with a major acceleration of home-grown technologies like offshore wind, carbon capture and storage, and, above all, nuclear”.
EVs will no longer be exempt from vehicle excise duty from April 2025, according to Mr Hunt, with plans for drivers to pay £10 for the first year, moving to the standard rate (£165 at present) thereafter.
A transcript of the Chancellor’s speech is available to view on the Government’s website.