Opinion: The Budget and the energy sector
Tom Bradley, Director of Cavendish Consulting, responds to the Autumn Budget and the impact it will have on the green energy industry…
This week’s Budget was seen by many as a pivotal moment for the new Labour government. Over 100 days into the new government, and with tumbling approval ratings, this was the first real opportunity for Labour to set out their vision for the UK economy and to try to re-set the agenda.
Photo by Ben Wicks
In the run-up to the UK general election, Rachel Reeves had promised to be the UK’s first ever ‘green Chancellor’ with Labour putting climate and net-zero at the heart of its manifesto and its pitch to the electorate. Indeed, making the UK a ‘green energy superpower’ is one of its five driving missions that are meant to be at the heart of this new government, shaping its agenda. How then did the Budget deliver?
On paper, it looks like Labour is putting energy front and centre, with the Department for Energy Security & Net Zero enjoying a whopping 22% increase in its departmental budget – the largest increase of any government department.
The UK’s hydrogen and carbon capture and storage (CCS) sectors will no doubt be pleased with some of what was announced by the Chancellor. Project-specific funding and commitments to future market mechanisms are a positive sign that the sectors will have been looking for, particularly after a year of upset, with both Labour and the Conservatives shelving commitments to and pilots of hydrogen in the gas network.
Those involved in Sizewell C will also no doubt be breathing a sigh of relief as government committed to further funding to take us up to a now confirmed final investment decision (FDI) in spring 2025.
However, the UK’s oil and gas industry has responded negatively to the Budget, facing additional tax burdens for the year ahead. This was an unwelcome, albeit perhaps not unexpected, announcement with the industry already having seen a number of larger players warn that the North Sea is becoming uneconomical to continue activity. It is also a blow in that, despite the government calling on the sector to transition and to reskill its workforce, there was no funding boost to support this. Too much ‘stick’ and no ‘carrot’ is how some will no doubt have seen this Budget.
For the majority of the energy sector though, this Budget was a bit of a non-starter. What was clear from the announcements made by Reeves this week, and indeed what we have seen coming out of government in the preceding weeks, is that this Budget is not the starting gun, rather it’s a holding pattern ahead of the all-important Spending Review in the spring. It’s this spring Spending Review that will set future departmental budgets which will unlock policy strategies, plans and roadmaps.
If we want to judge whether or not the new Government will deliver on its plans to make the UK a ‘clean energy superpower’, for now, it looks like we’ll just have to wait and see… But, what is clear, is that industry now has four short months to make its case. Come next spring we’ll be able to decide for ourselves.
In related news:
Less paperwork, more practice: UK Government data bill is economic win
Leave a Reply