Onshore wind is on again as the government gambles on growth.
The government’s press release is here with links to specific briefing documents and the full statement.
On Friday 23 September the Chancellor, in his ‘fiscal event’, announced “a new approach for a new era”, a relentless focus on growth aiming to achieve 2.5% a year. There is an All Party Parliamentary Group focused on Limits to Growth, named after the Club of Rome report from 1972 which showed that continuous growth on a finite planet is not possible or a good idea. The new chancellor, indeed very few people in parliament or anywhere seem to have heard of this problem.
The main tactic is cutting taxes, alongside deregulation, streamlining the public sector (cutting civil service jobs) and reforming the supply side of the economy.
But tucked away in The Growth Plan there are several measures of interest to community energy including “bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England” This will be part of a new Planning and Infrastructure Bill to accelerate priority major infrastructure projects across England (including roads!). Maybe we can use this rationalisation as a way to get some sense around Environment Agency assessment fees for hydropower.
On energy efficiency, “the government will bring forward legislation to implement new obligations on energy suppliers to help hundreds of thousands of their customers take action to reduce their energy bills, delivering an average saving of around £200 a year. This help will be worth £1 billion over the next three years, starting from April 2023. Support will be targeted at those most vulnerable, but will also be available for the least efficient homes in lower council tax bands. The government will also imminently open applications for up to £2.1 billion over the next two years to support local authorities, housing associations, schools and hospitals invest in energy efficiency and renewable heating.”
The government will streamline the Local Growth Funds (listed in our Funding Database) to make it easier for Local Authorities to access them.
They restated the Energy Price Guarantee and Energy Bill Relief Scheme (see our summary here) which will cap average bills at £2,500 for the next 2 years, but admitted that it is likely to cost more than £60bn in the first six months to be funded from increased borrowing rather than a windfall tax on oil and gas companies.
The government will seek to negotiate long-term agreements with major gas producers to reduce price volatility and is also working with electricity generators to reform the outdated market structure where gas sets the price for all electricity, better reflecting the cheaper home-grown low-carbon energy sources.
The basic rate of income tax will be reduced by 1p to 19p from April 2023 and the threatened national insurance rate increase to fund the NHS and Social Care will be abolished. They say funding for the NHS will be ‘maintained at the same level’. This is calculated to be worth £330 a year to the average earner.
The top rate of tax, currently 45p will be removed so that the top bracket is 40p. The cap on bankers bonuses has been removed. The latter two will of course greatly benefit higher earners. The corporation tax hike to 25% has been cancelled and it will remain at 19%.
They plan to cut stamp duty from today which historically has led to significant increases in 2nd home and buy to let purchases.
They plan around 40 new Investment Zones. Simon Clark, the Secretary of State at the Department of Levelling Up, Housing and Communities is holding discussions with local and mayoral combined authority areas in England including Tees Valley, South Yorkshire and West of England to set up Investment Zones in specific sites within their area. They will offer tax cuts in these designated zones to encourage investment and business development. These will include tax reliefs, no stamp duty or business rates on new business buildings and no NI on the first £50k of a new employee. Planning rules will also be liberalised to release more land for housing and commercial development.
Tax reliefs are being maintained or extended with the Annual Investment Allowance for businesses remaining at £1m permanently, Social Enterprise Investment Scheme was enhanced but not extended to include energy generation. The Government will change regulations to increase investment by pension funds into UK assets,
The plan contained few numbers but one headline was that the measures to protect homes and businesses from the worst impacts of the energy cost crisis will cost at least £60bn in the first 6 months from October! This and the tax cuts will be funded by additional borrowing, which will add to the eventual tax burden, whether this is paid for by additional growth or not. Meanwhile the oil and gas companies will make excess profits of £170bn over the next 2 years according to Treasury estimates, largely paid for by government subsidies for people and businesses’ energy bills.
The government refused to wait for independent assessment of the measures by the Office of Budget Responsibility. The figures provided show no convincing prediction of growth benefit to justify the huge cost. It does not acknowledge that a few pounds in the average wage-earner’s pocket will be swallowed by the rising cost of living and won’t contribute to growth. Neither, in any significant way, will the increased wealth in the wealthy does not trickle down.
For community energy there may be a thin silver lining as the cost of employment is slightly reduced and there may be some local opportunities from investment incentives. The government is still urging businesses with the wherewithal to invest in energy saving and renewables and these measures may mean that, even where businesses don’t have the wherewithal, despite the tax concessions, their community can help them install measures.
As the chancellor was speaking the pound fell to a 37 year low and the markets ended down 2%. The pound has since fallen to $1.04 due to lack of confidence in the government’s economic model. Interest rates on UK debt are up, increasing the cost of borrowing.
Rachel Reeves, Labour’s shadow Chancellor accused the government of gambling on an uncertain outcome. She said that tax cuts are not a sure route to simulating the economy, pointing out that whilst we have the lowest level of corporation tax in the G7 we also have the lowest level of business investment. And that in previous Stamp Duty cutsSome experts have said the government may have to borrow more than £200bn in the next year and interest on borrowing may climb to in excess of £100bn a year.
One MP pointed out that the government has offered £100 to those dependent on heating oil but many times that to those in upper tax brackets.
In short we welcome that onshore wind is back on! But not unfair tax cuts which benefit the rich at the expense of the poor whose tax burden has still gone up under this government. We also deplore the failure of imagination and understanding that pins all hope on growth when quite clearly it is the root of most of our existential problems. And the willingness to gamble on the swings of tax-cuts and deregulation when the roundabouts of the markets are already undoing any benefit, especially for the poorest in our society, on the rack of increasing cost of living.