In the Spring Budget the Chancellor set out a “Budget for growth” intended to remove obstacles to investment and employment, and halve inflation - which he predicted would drop from 10.7% at the end of last year to 2.9% by the end of 2023. It contained nothing that will immediately or directly improve things for community energy such as the National Community Energy Fund or the continuation of Social Investment Tax Relief extended to include community energy, as we had urged in our Representation to the Chancellor in February. Potential opportunities for community energy are highlighted below and listed at the end.
In his speech the Chancellor pledged to continue the Energy Price Guarantee at £2,500 for average bills for another 3 months from April, hoping that reducing energy prices will have brought average bills below that figure by the autumn. The Energy Bills Discount Scheme will provide all eligible businesses and other non-domestic energy users across the UK with a discount on high energy bills until 31 March 2024, following the end of the current Energy Bill Relief Scheme. However there was no mention of an enhanced ‘windfall tax’ on oil and gas companies despite Shell and BP recording record profits in 2022 of $39.9bn and $27.7bn respectively.
The Chancellor pledged to bring Pre-Payment Meter prices in line with Direct Debit prices, permanently. Righting this injustice is long overdue and to be welcomed. A progressive energy charging regime where prices go up as households use more energy above an agreed threshold is still far from being adopted.
The Chancellor said “I have heard from the charities minister and his Secretary of State [DCMS] about the brilliant work third sector organisations are doing to help people struggling in tough times. They can often reach people in need that central or local government cannot, so I will give his department £100 million to support thousands of local charities and community organisations do their fantastic work.” We will find out how this money can be accessed.
There will be a £63m fund to help keep leisure centres and swimming pools ‘afloat’ during the energy crisis. These are often inefficient users of energy and ripe for community energy saving and generation projects. An innovative scheme to heat swimming pools with excess heat from a data centre might be one way to go to access some of this funding.
The Chancellor froze fuel duty again, and maintained the 5p cut from the last Budget.
He promised Departmental spending would go up by 1% in real terms. Let’s hope the Department for Energy Security and Net Zero gets teeth and adequate funding to incentivise and enforce action across the government and the country.
He promised a 3rd round of the Levelling Up fund which has so far distributed £4bn to 200 projects in capital funding. As we have pointed out to several Secretaries of State and the Chancellor, if some of this had been spent in development funding for community energy projects it would have multiplied itself many times,
He also promised 12 new Investment Zones in the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. Areas that want to apply must identify a location where they can offer a bold and imaginative partnership between local government and a university or research institute in a way that catalyses new innovation clusters. If the application is successful, they will have access to £80 million of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention.
There will also be £200m for high quality local regeneration projects across England and £161m for Mayoral Combined Authorities and the Greater London Authority. He promised to make over £400 million available for new Levelling Up Partnerships in areas that include Redcar and Cleveland, Blackburn, Oldham, Rochdale, Mansfield, South Tyneside, and Bassetlaw. Community energy is a vital (though not mentioned) partner in these opportunities. If you’re in these areas, start or join discussions to access this opportunity.
He announced a second round of the City Region Sustainable Transport Settlements, allocating £8.8 billion over the next five-year funding period. And an extra £200m next year on top of the annual £500m already promised for potholes! Community energy is well placed to access some of the former for low carbon transport projects.
Under the heading Local Leadership he said: “for levelling up to truly succeed we need to unleash the civic entrepreneurship that is only possible when elected local leaders are able to fund and deliver solutions to their own challenges. That means giving them responsibility for local economic growth and the benefit from the upside when it happens. So the government will consult on transferring responsibilities for local economic development currently delivered by Local Enterprise Partnerships to support local economic development to local authorities from April 2024.” We will look out for that consultation and collect members’ thinking to input. If local authority chiefs are going to hold more of the purse strings and be able to ‘invest’ it becomes even more important for community energy to be “preferred partners/suppliers” already engaged in mutually beneficial collaborations. So as key ‘civic entrepreneurs’ the community energy sector must be building those alliances now!
He will also boost Mayors’ financial autonomy by agreeing multi-year single settlements for the West Midlands and the Greater Combined Manchester Authority at the next spending review, something he intends to roll out for all Mayoral areas over time (if he’s still in power - though Labour supports this kind of devolution). He has also agreed a new long-term commitment so that they can retain 100% of their business rates, something he hopes to expand to other areas over time.
The Corporation Tax rise to 25% in April will still go ahead and Rishi Sunak’s ‘super deduction’ investment allowance ends soon. In his Autumn Statement the chancellor had already increased the Annual Investment Allowance for SMEs to £1m. This time he has put in place "full capital expensing for the next 3 years with the intention of making it permanent.” This means that, until 31 March 2026 businesses can deduct 100% of every £1 invested in ‘qualifying main rate plant and machinery’ from its taxable profits in the same year, saving around 25p off its tax bill. Companies investing in ‘special rate (including long life) assets will also benefit from a 50% first-year allowance during this period’ meaning they will be able to save 12.5p per £1 invested in equipment such as solar panels and wind turbines. This may be an opportunity for community energy to partner with businesses.
The National Energy Efficiency Taskforce is being formed to help deliver the government’s national ambition to reduce energy use by 15%. We have requested to be part of this taskforce. To support this work the Climate Change Agreement scheme will be extended for two years to allow eligible businesses £600 million of tax relief on energy efficiency measures. But the vastly increased investment in this area that is needed to meet net zero and reduced energy inequality was not forthcoming.
There was no mention of extending Social Investment Tax Relief in April and making community energy eligible. So that potential avenue to derisk and support community energy enterprise will close and will have to be re-invented. Meanwhile the Budget increased the amount accredited Community Development Finance Initiative bodies can raise under the Community Investment Tax Relief with a budgeted allowance of £5m in 2024-25,£10m in 2025-26 and £15m in 2026-27 and 2027-28. The uptake of this by community energy has been very low but some are convinced that it is advantageous. We will look into this further.
With the aim of mobilising the ‘economically inactive’, the Chancellor put in place a range of measures.
To help parents and carers, new childcare funding is introduced, paid up front, to improve access to childcare. This is welcome. He also published a White Paper on disability benefits reform to enable disabled people to apply for work without fear of losing benefits. The government will fund a new programme called Universal Support offering up to £4,000 per disabled person to help them find appropriate jobs and put in place the support they need. It will fund 50,000 places every single year. There will also be support for people who would otherwise leave work for mental or physical health reasons (such as back pain). Occupational health is key and they will consult on how to improve its availability and double the funding for the small company subsidy pilot. This too is welcome. There are further welcome measures to enable young people in care to enter work.
To help keep ‘experienced older workers’ in the workplace a new apprenticeship scheme called ‘Returnerships’ will operate alongside skills bootcamps and sector based work academies.
Principally motivated by the problem of doctors leaving the workplace early for fear of breaching the Lifetime Allowance of £1m for the total pension pot, beyond which tax penalties increase, the Chancellor abolished the Lifetime Allowance altogether and increased the annual tax free pensions contribution limit from £40,000 to £60,000. This will help, not just doctors, but the 1% of extremely well paid people build up an even bigger pension pot. This is the only permanent tax cut in the budget and it supports only the already wealthy which is regressive and unfair. Labour has already pledged to reverse this measure if elected.
Sanctions on those on Universal Credit who do not conform or take offered work will increase. Minimum earnings to avoid a ‘more intensive conditionality regime’ and having to attend more appointments with work coaches rises from £102.50 to £187.56 from April 2023. This too is regressive.
He promised to return in the Autumn Statement with a plan to deliver “larger, more diverse financing system.. where the benefits of investment… are available to more investors” This must include measures to enable community energy to create more investable projects to democratise the energy transition and give people real ownership of the future of energy. It will also “complete the government’s response to the challenges created by the US Inflation Reduction Act” which is enabling the US to gain a head start in cornering net zero markets.
Investment but in the wrong stuff.
He said “the long-term solution is not subsidy but security. That means investing in domestic sources of energy that fall outside Putin or any autocrat’s control. We are world leaders in renewable energy.” He implies that all is fine on that front despite his governments failure to open up onshore wind which has been shown as critical to meeting our legally binding decarbonisation targets. So he is free to “develop another plank of our green economy, Carbon Capture Usage and Storage” allocating up to £20 billion of support for the early development of CCUS. He asserts this will support up to 50,000 jobs, (ie £400,000 per job) attract private sector investment and help capture 20-30 million tonnes of CO2 per year by 2030. Carbon Capture was recently described by the Institute of Energy Economics and Financial Analysis as having a long history - of failure. It is hugely costly, is an excuse not to change based on a ‘future promise’ that is unlikely to deliver on time, if at all, and steals money from investment in energy demand reductions and alternative low carbon solutions that remove permanently the need for the high-carbon energy from which we will eternally need to spend ⅓ extra energy sequestering the carbon.
If the government would give community energy £20 billion we will deliver system change
Additionally he said “because the wind doesn’t always blow and the sun doesn’t always shine, even under a Conservative government, we will need another critical source of cheap and reliable energy. And that is nuclear.
So to encourage the private sector investment into our nuclear programme, I today confirm that subject to consultation nuclear power will be classed as “environmentally sustainable” in our green taxonomy, giving it access to the same investment incentives as renewable energy. Alongside that will come more public investment. In the Autumn Statement, I announced the first state-financed investment in nuclear for a generation, a £700 million investment in Sizewell C.”
He announced “two further commitments to deliver our nuclear ambitions.
- the launch of Great British Nuclear which will bring down costs and provide opportunities across the nuclear supply chain to help provide up to one quarter of our electricity by 2050.
- the first competition for Small Modular Reactors. It will be completed by the end of this year and if demonstrated as viable we will co-fund this exciting new technology.”
This is misguided for the same reasons as CCUS. Additionally it is not ‘environmentally sustainable’ but dangerous, leaving nuclear waste that must be guarded for millenia longer than human civilisation has existed, will deliver too late and only after huge upfront emissions of carbon. It locks in our dependency on imported feedstocks from distant or unstable countries and to a generation source that, according to a study by Prof Keith Barnham from Imperial College, is likely to be higher carbon than the 50g p kWh grid intensity that is Climate Change Committee's recommended limit for new sources of power generation beyond 2030.
So the Budget contained nothing directly for the community energy sector. We honestly didn’t expect a National Community Energy Fund but the failure to renew Social Investment Tax Relief and extend it to community energy is an abandonment of social business and the net zero cause. There are some local economic opportunities that community energy may be able to exploit and a few opportunities to employ people previously excluded from the jobs market. Support for childcare, over 50 apprenticeships are progressive and welcome. Other measures such as the stricter regime around Universal Credit and the removal of the Lifetime Allowance are regressive. Net zero and energy efficiency is not adequately prioritised. CEE will aim to help members access the opportunities that are in the Budget.
Summary of Potential Opportunities for Community Energy
- The Energy Price Guarantee at £2,500 for average bills will continue for another 3 months from April.
- The Energy Bills Discount Scheme will provide all eligible businesses and other non-domestic energy users across the UK with a discount on high energy bills until 31 March 2024, following the end of the current Energy Bill Relief Scheme.
- The Chancellor has pledged to bring Pre-Payment Meter prices in line with Direct Debit prices, permanently.
- The Department for Culture Media and Sport is to receive £100 million to support thousands of local charities and community organisations.
- The Levelling Up fund is renewed for a third round. It has so far distributed £4bn to 200 projects in capital funding.
- 12 new Investment Zones in the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool were announced.
- £200m has been pledged for high quality local regeneration projects across England.
- £161m has been pledged for Mayoral Combined Authorities and the Greater London Authority.
- Over £400 million is to be made available for new Levelling Up Partnerships in areas that include Redcar and Cleveland, Blackburn, Oldham, Rochdale, Mansfield, South Tyneside, and Bassetlaw.
- The City Region Sustainable Transport Settlements is renewed for a second round, allocating £8.8 billion over the next five-year funding period.
- Mayoral financial autonomy is to be boosted, with multi-year single settlements for the West Midlands and the Greater Combined Manchester Authority at the next spending review, with intentions to roll out for all Mayoral areas over time.
- The National Energy Efficiency Taskforce is being formed to help deliver the government’s national ambition to reduce energy use by 15%. We have requested to be part of this taskforce.