Government pledges £6bn on energy efficiency (from 2025-28). But the majority of households will be in fuel poverty by next year while the oil and gas companies continue a profits bonanza. Community energy is effectively excluded from a 45% excess profits levy on low carbon generation.
The Chancellor’s task in his Autumn Statement is to plug the £55 billion hole in the public finances and re-establish confidence in the UK economy. He chose a ‘balanced approach’ of around £25 billion of tax rises and the rest from controlling public spending. He pledged to support stability, growth and public services. He added “We also protect the vulnerable.” and are “fair in our solutions”. In his speech he quoted the Office for Budget responsibility projections extensively, declaring we are now in a recession and that unemployment will rise to 4.9% in 2024.
Near the end of his statement he mentioned that the Energy Price Guarantee, which is costing the government £55bn this winter, will be extended from April for another twelve months but at an increased rate. Price per kWh is currently capped so that the average household pays no more than £2,500 in energy bills. From April this cap will go up to £3,000, and many will pay much more. Given that the average salary in the UK is just under £28,000 that means that well more than half the population will officially be in fuel poverty.
He raised benefits and pensions in line with September’s inflation rate of 10.1%. (Inflation in October was 11.1%) The national living wage will rise by 9.7% and rises in social housing rents will be capped at 7%. In 2023-24 an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits, of £300 to all pensioner households, and of £150 to individuals on disability benefits. They promise a twelve month extension to the Household Support Fund to enable local authorities to help the vulnerable in their area. Those on alternative fuels such as LPG or oil will see the derisory £100 offered by the previous Chancellor doubled to the almost equally inadequate £200 ‘as soon as possible’. There will be a ‘targetted approach’ to assist businesses beyond next April.
The Chancellor quoted the Prime Minister, saying that “Growth is made of ‘people, capital and ideas’” To this he added Energy, Infrastructure and Innovation. (These six pretty well sum up community energy - but he didn’t make that connection.) He noted that the national energy bill went up by £150bn over the last year.
On the Energy front he pledged more “energy independence and energy efficiency to reduce demand and climate impact as much as possible”. He promised “a major acceleration of home-grown technologies like offshore wind, carbon capture and storage, and, above all, nuclear.” announcing that “the government will proceed with the new plant at Sizewell C", signing contracts in the coming weeks. This will cost the government £700m, and power the equivalent of 6 million homes.
No mention is made of onshore wind which is cheaper, quicker to develop, safer and isn’t dependent on overseas developers like EDF and imported fuel. The previous Chancellor had pledged to open up onshore wind in England by "bringing onshore wind planning policy in line with other infrastructure". Please write to your MP asking they contact the PM and the BEIS Secretary of State to urge this commitment be restated.
We hope this omission is because the decision has not been made rather than that we are back to the sad concession in the Energy Security Strategy to “developing local partnerships for a limited number of supportive communities who wish to host new onshore wind infrastructure in return for benefits, including lower energy bills.” The promised consultation on this is due out before the end of the year. We will flag this to the sector and urge members to respond.
Nuclear and Carbon Capture and Storage are dangerous distractions and wastes of money. Neither will deliver in time to make the critical difference in the next decade. Carbon Capture was recently described by the Institute of Energy Economics and Financial Analysis as having a long history - of failure. Nuclear, which provides inflexible baseload, is not the kind of energy we need to enable the transition to variable renewables. It creates waste that must be safely guarded for many times longer than human civilisation has existed at a time of increasing geopolitical instability. And it is not even low carbon according to a study by Prof Keith Barnham from Imperial College. Sizewell C is on a site that will ultimately be flooded by sea level rise. Campaigners have argued of virtually every large power station since Drax in the 70s (including Sizewell B) that if the investment were spent on saving energy it would remove the need for the power station as well as creating more jobs.
The Business and Energy Secretary will publish further details on the government’s energy independence plans shortly.
The Chancellor did say “energy efficiency is just as important” as new generation and set a “new national ambition”: “by 2030, we want to reduce energy consumption from buildings and industry by 15%.” He announced “new funding, from 2025, [to 2028] of a further £6 billion – doubling our annual investment to deliver this new national ambition.” The next election is before then. (For context the Energy Efficiency and Insulation Group's Net Zero Litmus Test study from 2019 stated that "In total, bringing all homes up to at least EPC Band C and so cutting energy demand in homes by 25% represents an energy saving equivalent to the
annual output of six power stations the size of Hinkley Point C.")
He promised a new Energy Efficiency Taskforce would be launched shortly. This may represent a new seriousness from a government that has realised that poor energy efficiency is hitting the government directly in the pocket. We welcome this increased focus on energy efficiency. We hope it is targeted at the ‘worst first’ and will urgently deliver savings and increased well-being for the fuel poor. CEE's Energy Efficiency Working Group will engaged strongly to ensure community energy is part of the solution.
The Chancellor reaffirmed the government’s commitment to its net zero targets, including the 68% reduction in emissions by 2030. However he failed to heed the Climate Change Committee’s oft repeated warning that ”It will not be possible to get close to meeting a net-zero target without engaging with people or by pursuing an approach that focuses only on supply-side changes”. We got a bit of focus on the demand side but nothing about empowering people (other than Conservative metro mayors) to lead on local climate action.
Stability means reducing inflation and borrowing. There will be tax rises, though “those with more will pay more”. The Resolution Foundation calculates that those on middle incomes, many of whom are already struggling with cost of living increases will take a 3.7% hit on their incomes as a result of this Budget.
But big oil and gas companies, who the Treasury estimates will make £171 billion over this year and next, will only see their excess profits tax rise from 25% to 35% (until 2028) and will keep the investment allowance which gives them back 29p (reduced from 91p) for every £1 invested in new oil and gas. As a result of this allowance Shell has paid no windfall tax on profits of £30bn and BP only £800m on ‘eyewatering’ profits this year. This incentises investment in new fossil fuel extraction at a time when the UN warns we must halve emissions by 2030.
The Chancellor has however implemented the Electricity Generator Levy, a profits levy on low-carbon electricity generators of 45% which may harm the ramping up of low-carbon generation that we so urgently need. "This tax will be limited to generators whose in-scope generation output exceeds 100GWh across a period and will only then apply to extraordinary returns exceeding £10 million". So most community energy companies are likely to be unaffected.
He promised round 2 of the Levelling Up Fund of at least £1.7 billion. (We will flag that and add to our Funding Database when more is known.) Almost in the same breath he said he would “make it easier for local leaders to make things happen without knocking on a Westminster door” and praised Conservative Mayors’ “civic entrepreneurship”. Once again no mention or help for the entrepreneurship of community energy leaders.
Under the Infrastructure heading he pledged no reduction in capital budgets with £600 billion being spent over the next five years, including on road and big rail projects. Under Innovation he announced that the UK is to become the world’s next Silicon Valley. He would drive competition, challenging monopolies (will this include those in the energy sector?), removing import tariffs on key products and components. ‘Investment Zones’ will now be centred on universities in left behind areas and there will be an increase in R&D budgets.
All in all communities and vulnerable people will have a tough time over coming years and community energy will have a key role to play in building local energy resilience. It has been effectively excluded from the 45% excess profits levy on low carbon generation but also has not been recognised yet as deserving of special support from government.