Budget Briefing 6th March 2024
The Chancellor has delivered the Spring Budget 2024; please find enclosed details of those policies that may affect our clients:
Executive Summary
In the last four years, the economy has been buffeted by external shocks, including the COVID-19 pandemic and Putin’s illegal invasion of Ukraine. These shocks have made life tough for people in the UK, but the economy is beginning to turn a corner.
In January 2023 the Prime Minister set out five priorities. Three of them were economic: to halve inflation in 2023, grow the economy and reduce debt. Since then, there has been good progress:
- Inflation has more than halved, falling from its peak of 11.1% to 4.0%. The Office for Budget Responsibility (OBR) forecasts that inflation will return to the 2% target next quarter, a year earlier than forecast in November 2023
- Growth has been stronger than expected at the start of 2023. GDP is forecast to grow in every year of the OBR’s forecast.
- Debt is forecast to fall as a proportion of GDP in the medium term.
Planning & Grid Connection Reforms
At Autumn Statement 2023 the government announced a range of reforms to the planning system to support business investment and the delivery of infrastructure. The government has made progress with implementing these, including through publishing the consultation on permitted development rights.
At Spring Budget, the government is publishing the consultation on a new accelerated planning service for major commercial applications; a response to the consultation on operational reforms to the Nationally Significant Infrastructure Project regime; and the updated National Networks National Policy Statement.
The government is working with industry and Ofgem to implement electricity grid reforms announced at Autumn Statement 2023. Since November, over 40GW of energy projects have been offered earlier grid connection dates, accelerating up to £40 billion of investment.
The Electricity System Operator is inserting delivery milestones into over 1,000 connection contracts to remove stalled projects from the queue from this autumn. In addition, network companies have announced investment programmes, framework agreements and tenders worth up to £85 billion.
Green Industries
The UK is the first major economy to halve its emissions – cutting them by 50% between 1990 and 2022, whilst growing the economy by 79%
Building on the series of measures to super-charge the growth of the UK’s green industries announced at Autumn Statement 2023, the government is announcing up to a further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK.
Of the over £1 billion of total funding available, up to £390 million is expected to support supply chains of offshore wind & electricity networks and the same amount for supply chains of Carbon Capture Utilisation and Storage (CCUS) and hydrogen.
In addition, at Spring Budget the government is providing clarity and certainty for investment into the UK’s renewables sector, publishing the full parameters for the Contracts for Difference Allocation Round 6 (AR6), including setting the largest ever budget for a single round of over £1 billion.
Fuel Duty
The government is freezing fuel duty rates for 2024-2025, a tax cut worth £3.1 billion over 2024-25. The temporary 5p cut in fuel duty rates will be extended until March 2025 and the planned inflation increase for 2024-2025 will not take place.
Energy Profits Levy
The government is extending the Energy Profits Levy (EPL) to the end of March 2029. At the same time, to give the oil and gas sector certainty that the EPL will not apply if prices fall below the levels set by the Energy Security Investment Mechanism, the government is delivering on its commitment to provide for the mechanism in legislation through the Spring Finance Bill 2024.
Electricity Grid Reform
The government will implement a new stringent connections process from January 2025 and work with the Electricity System Operator to outline further interim reforms to the grid queue process by summer 2024. The government will establish the National Energy System Operator in 2024, and will publish new community benefits guidance by June 2024.
Regulation of Environmental, Social and Governance Ratings
The government will regulate providers of Environmental, Social and Governance (ESG) ratings to users within the UK. ESG ratings providers will be brought into the regulatory perimeter of the Financial Conduct Authority.
Climate Change Agreement (CCA)
In the Spring Budget 2023 the government announced it would extend the scheme for two years, open to new entrants and increase the buy-out price to £25/tCO2e. The government will now introduce a new 6-year scheme from 1st January 2025 to the 31st December 2030.
Climate Change Levy
The government will freeze main and reduced rates of Climate Change Levy in the UK in 2024-2025 at the main rate of £0.00775/kWh for electricity and gas, £0.02175/kWh for liquid petroleum gas (LPG), and £0.06064/kWh for any other taxable commodity. Reduced rates will be frozen at 92% for electricity, 77% for LPG, and 89% for gas and any other taxable commodity.
The main and reduced rates for 2024 and the rates for 2025 are as follows:
| Taxable Commodity | Rate from 01/04/2024 | Rate from 01/04/2025 |
| Electricity (£ per kWh) | 0.00775 | 0.00775 |
| Natural gas (£ per kWh) | 0.00775 | 0.00775 |
| LPG (£ per kg) | 0.02175 | 0.02175 |
UK Emissions Trading Scheme (UKETS)
The UKETS will be expanded to include the maritime and waste sectors.
