Budget Briefing – 29th October 2018

Budget - October 2019

The Chancellor has delivered the Autumn Budget 2018; please find enclosed details of those policies that may affect our clients:

Budget Policy Overview

This is a Budget that shows the British people that the hard work is paying off. The substantial upgrade to the health of the public finances that the Office for Budget Responsibility (OBR) has made underscores the strength of the government’s fiscal management and the economic recovery since 2010. The Budget supports this by:

  • setting out a new path for public spending ahead of the Spending Review in 2019, with day-to-day departmental spending now growing in real terms for the first time since 2010
  • funding the NHS for its new five-year settlement until 2023-24, announced by the government in June to celebrate the NHS’s 70th birthday; and providing local councils with additional funding for social care to help older people with care needs and help children to live safely at home
  • delivering the government’s commitment to increase the Personal Allowance to £12,500 in 2019-20, a year earlier than planned, so that people can keep more of what they earn
  • boosting the National Living Wage and increasing the Universal Credit (UC) Work Allowances by £1000, to ensure that work pays and help families with the cost of living
  • investing £1 billion in defence across 2018-19 and 2019-20, and £160 million in counter-terrorism police in 2019-20, so that they are well equipped to keep citizens and communities safe
  • increasing the National Productivity Investment Fund (NPIF) from £31 billion to £37 billion, and delivering the largest ever strategic roads investment package worth £28.8 billion from 2020-2025
  • backing business with further incentives to invest in the short and long term, with a temporary increase in the Annual Investment Allowance to £1 million and the introduction of a new allowance for investments in non-residential structures and buildings
  • ensuring that large, established, digital services companies pay their fair share by introducing a 2% tax on the revenues of search engines, social media platforms and online marketplaces, reflecting the value they derive from UK users
  • preparing for exiting the EU by providing an additional £500 million to government departments, bringing the government’s investment in EU exit preparations to over £4 billion since 2016

Energy and Environmental Taxes

Fuel Duty

Fuel duty will be frozen for a ninth successive year saving the average driver a cumulative £1,000 by April 2020, compared with what they would have paid under the pre‑2010 fuel duty escalator.

Carbon price support (CPS)

The price of EU Emissions Trading System (ETS) allowances has risen significantly over recent months, raising the Total Carbon Price (currently made up of the EU ETS price and the CPS rate). The government will freeze the CPS rate at £18/tCO2 for 2020-21. From 2021-22, the government will seek to reduce the CPS rate if the Total Carbon Price remains high.

The government continues to plan for all scenarios as it prepares for EU exit. In the unlikely event no mutually satisfactory agreement can be reached and the UK departs from the EU ETS in 2019, the government would introduce a Carbon Emissions Tax to help meet the UK’s legally binding carbon reduction commitments under the Climate Change Act. The tax would apply to all stationary installations currently participating in the EU ETS from 1 April 2019. A rate of £16 would apply to each tonne of carbon dioxide emitted over and above an installation’s emissions allowance, which would be based on the installation’s free allowances under the EU ETS. The government is also legislating so it can prepare for a range of long-term carbon pricing options.

Climate Change Levy (CCL) – Move towards equalised gas and electricity rates

The Budget sets the CCL main rates for 2020-21 and 2021-22 and continues with the government’s commitment to rebalance the main rates paid for gas and electricity. The electricity rate will be lowered in 2020-21 and 2021-22. The gas rate will increase in 2020-21 and 2021-22 so it reaches 60% of the electricity main rate by 2021-22.

Other fuels, such as coal, will continue to align with the gas rate. The discount for sectors with Climate Change Agreements will change to reflect the change in CCL main rates.

The costing is calculated by multiplying the tax base by the difference between the pre- and post-measure tax rates. The tax rates are adjusted by increasing CCL rates for gas and reducing CCL rates for electricity, with solid fuel rates proportionately adjusted in line with gas rates.

No changes are made to LPG rates, as these were frozen at Autumn Budget 2017 for 2020-21 and 2021-22. This costing assumes that after 2021-22 all fuel rates are uprated by RPI, but rates from 2022-23 will be announced at future fiscal events.

Enhanced Capital Allowances (ECAs)

The government will end ECAs and First Year Tax Credits for technologies on the Energy Technology List and Water Technology List from April 2020. These ECAs add complexity to the tax system and the government believes there are more effective ways to support energy efficiency. The savings will be reinvested in an Industrial Energy Transformation Fund, to support significant energy users to cut their energy bills and transition UK industry to a low carbon future.

The government will extend the ECA for companies investing in electric vehicle charge points to 31 March 2023. This will help achieve the government’s ambition for the UK to become a world-leader in the ultra-low emission vehicle market.

Improving Business Energy Efficiency

The government will issue a call for evidence on introducing a new Business Energy Efficiency Scheme, focused on smaller businesses. Over time, this scheme will reduce business energy bills and carbon emissions. The call for evidence will seek views on a range of possible delivery options.

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