Budget Briefing – 22nd November 2023
The Chancellor has delivered the Autumn Statement 2023; please find enclosed details of those policies that may affect our clients:
Budget Policy Overview
In January 2023 the Prime Minister set out three economic priorities: to halve inflation, grow the economy and reduce debt. The latest Office for National Statistics (ONS) data and forecasts from the Office for Budget Responsibility (OBR) show:
- Inflation is less than half its peak. Responsible decisions taken by the government to limit borrowing have supported the Bank of England in its action to bring inflation down.
- Economic growth has been resilient, and the economy is now expected to grow in every year of the forecast period. Revisions to gross domestic product (GDP) show that the UK economy recovered more strongly from the pandemic than previously thought.
- Debt is forecast to fall as a proportion of GDP over the medium term, with greater headroom than at Spring Budget 2023.
The government is also creating more certainty for investors in low-carbon infrastructure by extending the critical national priority designation for nationally significant low-carbon energy projects. It will also consult on introducing new permitted development rights to end the blanket restriction on heat pumps one metre from a property boundary in England. Together these measures will reduce delays and capitalise on the UK’s world-leading approach to decarbonising the economy.
Substantive action is required to address the lengthy wait to connect to the electricity grid. These delays limit investment in the transition to low-carbon power generation, which is critical to the UK’s energy security. The government is therefore announcing reform of the grid connection process to cut waiting times, including freeing up over 100GW of capacity so that projects can connect sooner.
The UK Emissions Trading Scheme (ETS) plays a vital role in providing businesses with the long-term certainty to plan ahead and decarbonise efficiently. Reforms to the ETS, as set out by the UK ETS Authority in July 2023, will reduce the number of ETS permits available for purchase from government by 45% between 2023 and 2025. It will also extend the scheme to cover emissions from domestic maritime and energy from waste in 2026 and 2028 respectively. This is an important step in achieving net zero ambitions.
The government is providing support to help firms transition to a resilient, low-carbon and industrially competitive future. This includes spending £185 million on the Industrial Energy Transformation Fund (IETF) to support industrial sites invest in more energy efficient and low-carbon technologies. This grant funding will come from the £6 billion announced at Autumn Statement 2022 to support energy efficiency from 2025, with further allocations set out in due course. The government is also providing around £300 million a year in tax relief in exchange for meeting energy efficiency targets under the new six-year Climate Change Agreement scheme which starts from 2025, and expanding VAT relief available on the installation of energy-saving materials in residential buildings or those used solely for a relevant charitable purpose.
To support continued investment in the UK’s renewable generation capacity, the government will legislate for a new investment exemption for the Electricity Generator Levy (EGL). New projects for which the substantive decision to proceed is made on or after 22 November 2023 will be exempt from the EGL. The EGL will end as planned on 31st March 2028.
The government has also set out the parameters for the next renewables Contracts for Difference auction round, increasing the maximum price that can be received, and will shortly publish further details on growing hydrogen and Carbon Capture, Usage and Storage (CCUS) deployment, ensuring that the government’s world-leading clean energy deployment continues at pace and remains on track to meet the government’s energy security and net zero ambitions.
The government is announcing a £960 million Green Industries Growth Accelerator (GIGA). This will support investments in manufacturing capabilities for the clean energy sectors where the UK can gain the clearest strengths: Carbon Capture Utilisation and Storage (CCUS), hydrogen, offshore wind, electricity networks, and nuclear.
Energy and Environmental Taxes
Climate Change Levy
The government will freeze main and reduced rates of Climate Change Levy in the UK in 2025-2026 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 2023 and the rates for 2024 to 2025 are as follows:
Climate Change Levy Main Rates
|Rate from 01/04/2023
|Rate from 01/04/2024
|Rate from 01/04/2025
|Electricity (£ per kWh)
|Natural gas (£ per kWh)
|LPG (£ per kg)
Electricity Generator Levy (EGL)
The government will legislate so that, where the substantive decision to proceed with a project to create a new electricity generation station or expand an existing generating station is made on or after 22 November 2023, receipts from that new generating station or additional capacity will not be subject to the Electricity Generator Levy.
Future Climate Change Agreement Scheme
The government is introducing a new, six-year Climate Change Agreement scheme. Participants that meet agreed energy efficiency or decarbonisation targets between 2025 and 2030 will be entitled to reduced rates of Climate Change Levy from 1st July 2027 to 31st March 2033. The new scheme will be open to applications for new sectors that meet energy intensity and import penetration criteria, and will require more regular reporting of energy and throughput data.
Reforms to Energy-Saving Materials VAT Relief
Following a call for evidence, the government will expand the VAT relief available on the installation of energy-saving materials by extending the relief to additional technologies – such as water-source heat pumps – and bringing buildings used solely for a relevant charitable purpose within scope. These reforms will be implemented UK-wide in February 2024. Full details on these reforms will be published shortly.
Carbon Price Support Review
The government will maintain Carbon Price Support (CPS) rates in Great Britain at a level equivalent to £18 per tonne of carbon dioxide in 2025-26. The government will continue to engage with industry and review CPS beyond the announced rates.
Emissions Trading Scheme (ETS)
Reforms to the ETS, as set out by the UK ETS Authority in July 2023, will reduce the number of ETS permits available for purchase from government by 45% between 2023 and 2027. It will also extend the scheme to cover emissions from domestic maritime and energy from waste in 2026 and 2028 respectively.