Spending Review and Budget 2021 - CEE summary for members and response

27/10/2021

On 27 October, the Chancellor made his statement to the House of Commons on the nation’s finances and the Government’s proposals for changes to taxation and spend. The Spending Review and Budget documents are here. You can see our recommendations to the Chancellor here

Climate change was not mentioned in the Chancellor's speech which made much of fiscal responsibility. Many spending pledges (mostly to large-scale centralised projects) were made in the Net Zero Strategy which was published on Tuesday 19 October. These have already been agreed with the Treasury, such as funding for new nuclear power, and are not re-stated in the Budget. The government had promised to set out plans for community energy in the Net Zero Strategy but it contained neither a plan nor the practical support measures which the Environmental Audit Committee had recommended. See our response to the Net Zero Strategy here.

Overview and general comment

The Chancellor started his speech by saying that the future “must come from the imagination and drive of our entrepreneurs”. As with “empowering Local Leaders” which the Net Zero Strategy and Levelling Up agenda speak much of, they don’t seem to include specific support for the leaders and entrepreneurs in the community energy sector.

The Department for Business, Energy & Industrial Strategy’s (BEIS) departmental budget will be increased by an average of 7.5% annually until 2024/5 although this is certainly not enough to achieve the existentially necessary task of achieving net zero. Our hope must be that there is sufficient in BEIS’s departmental budget to run to funding for some support, such as an extension of the Rural Community Energy Fund, expanded to include urban, heat, retrofit and energy efficiency projects. It will be vital to campaign to the Secretary to State to make sure that it is a priority among the competing demands on those funds. See here for actions to take to help that campaign.

Significant funding may be available through other sources such as the Levelling Up Fund (which pledged £1.7m to projects) and the UK Shared Prosperity Fund (designed to replace EU funding at £1.5bn a year. These are all centrally administered funds. CEE is working on an index of these potential sources of funding for community energy projects.

The Chancellor also promised £22bn a year by 2027 for innovation with £20bn a year by 2025 to help the people of this country “invent, discover and create the ideas and technologies that change the world”. Additionally there will be an increase in Research and Development tax reliefs to 1.1% of GDP and a new Research and Invention Agency with £800m a year by 2025-26 and doubling InnovateUK’s budget to £8bn. He mentioned that the Net Zero Strategy pledged “£30bn to create the new green industry of the future” and boasted that the UK has “just issued its second Green Bond making it the third largest issue of green sovereign bond anywhere in the world”, although the comparatively low level of interest for investors has drawn criticism.  The UK Infrastructure Bank has just made its first investment, £107m in offshore wind on Teesside.

The Chancellor said “Innovation comes from the imagination, drive and risk-taking of business. That’s why we’ve launched Help to Grow to turbocharge SME productivity, started a new co-investment venture capital fund - Future Fund Breakthrough”. He promised to consult on “further changes to the regulatory charge cap for pension schemes unlocking institutional investment whilst protecting savers”. He announced a new £1.4bn Global Britain Investment Fund supporting transformative economic activity in world leading sectors. The British Business Bank’s Regional Financing Programmes are increased to £1.6bn to help innovative businesses access finance.

From April 2023, R&D tax relief will incentivise companies to do more R&D activity within the UK.

The Chancellor promised a £3.8bn increase in the skills programme: institutes of technology, rolling out the Lifetime Skills Guarantee, quadrupling the number of places on Skills Bootcamps and increasing funding for apprenticeships.

The conclusions of the drawn-out Fundamental Business Rates Review are also published today. The Chancellor promised a fairer and simpler system with more frequent revaluations, every 3 years from 2023. He announced a new Green Investment Relief to encourage businesses to adopt green technology such as solar panels (something we asked for) and, from 2023, a Business Rates Improvement Relief so that if businesses improve their premises they will pay no extra rates for 12 months. Together these reliefs are worth £750m. The Business Rates multiplier increase planned for next year will be cancelled. Retail, hospitality and leisure businesses will enjoy a 50% business rates cut for one year from 1 December. The initiatives above may provide opportunities to work with local businesses - some of whom may even have more money than they expected.

The Chancellor introduced Corporation Tax measures to help small challenger banks which “are helping banking competition, which is good for the sector and good for consumers”. It’s strange that small energy suppliers are not looked on in the same light in the current energy crisis.

The minimum wage was raised to £9.50. The Universal Credit taper that reduces benefits by 63p for every extra £1 earned in work is reduced by 8% to 55p per £1 which may help low earners but is unlikely to offset the removal of the £20 uplift, the highest tax levels since the 1950s as a result of National Insurance rise, rising fuel bills and inflation.

Opposition parties characterised the Budget as taking £20 with one hand while giving £10 back with the other. They noted how little there was on tackling climate change and that some measures would increase emissions.

There was no mention of insulating Britain - without which it is widely acknowledged that we will fail to achieve net zero. The Climate Change Committee estimates that we need at least £10bn over this parliament. The £9.2bn pledged for building energy retrofit in the Conservative manifesto has still not been fully allocated. There was no move to reduce or remove VAT on Energy Saving Measures, including solar panels and batteries, despite widespread campaigning including in the Daily Express.

The statement that “Infrastructure... levels up” prefaced an announcement of a £21bn spend on roads. For the twelfth year running he cancelled any increase in fuel tax. He cut air passenger duty from April 2023 on domestic flights by half - thereby incentivising short haul flights over rail. (From April 2023 there will be a new ultra long haul passenger duty band for flights over 5000 miles of £91. This was advertised as a “change to reduce carbon emissions from aviation”.) 

Summary

Overall there seems to be little for community energy or other community or social business in the budget and certainly not enough to lead the world on tackling climate change. We will have to hunt among the funds and initiatives above to see how the sector can extract benefit.

Further detail of departmental budgets will follow over the next few months and so there is the possibility that support for community energy will be identified. The minimum we will be hoping for is an expanded Rural Community Energy Fund that includes urban, heat, retrofit and energy efficiency projects and supports capacity building within the sector.

Actions and next steps

The next couple of months will be vital to campaign to the The Rt Hon Kwasi Kwarteng MP, the current Secretary to State for Business, Energy and Industrial Strategy, to ensure that community energy features within the department’s spending plans and isn’t lost amongst competing demands on those funds. 

This will be a priority for CEE and we will keep our members updated through our regular member and policy newsletters. 

We ask all members and anyone that supports community energy, to please write to your MP asking them to write to the Secretary of State urging support for community energy. You can find more information and support on how to do this, along with other actions here.

We are also working on an index of potential sources of more general and centrally-administered funding to identify which could be used for community energy and will be sharing this with our members shortly. If anyone knows anything about how community energy groups could access any of these funds or support programmes (or is keen to research it yourself) please send us a summary of the opportunity to share with the sector.

In the meantime, you can see other latest funding opportunities here.