Budget 2024: What does the green economy want the Chancellor to announce?

Pictured: PM Rishi Sunak and Chancellor Jeremy Hunt. Image: 10 Downing Street CC BY-NC-ND 2.0 DEED

With the UK having recently entered a recession, Hunt will be under pressure to have some surprises up his sleeve for this Budget, targeted at supporting homes and businesses through the (likely turbulent) months ahead.

The Budget also comes against the backdrop of a legal challenge to the UK Government’s net-zero strategy spearheaded by Friends of the Earth, ClientEarth and the Good Law Project, plus the recent approval of Chris Packham’s request for a judicial review into the green policy rollbacks announced by the Prime Minister in September 2023.

The heat is on for the Government to present a joined-up and ambitious plan to couple economic growth with levelling up and net-zero. But he may simply say this is too challenging to be possible, opting instead for short-termist freezes to public spending.

Hunt is due to deliver his speech on Wednesday lunchtime (6 March), shortly after PMQs.

Read on for edie’s 2024 Budget preview, listing inclusions that major green economy organisations are calling for.

Increased public spending, with a strategic green lens

Hunt is reportedly looking to cut public spending to enable tax breaks and/or freezes – part of the Government’s wish to not be seen as burdening the general public with extra costs amid a recession.

The UK’s only Green MP Caroline Lucas has cautioned strongly against this approach in a letter to the Chancellor, co-signed by several other MPs and Lords.

The letter expresses a “deep concern” that the UK ranks lowest in the G7 for private investment and below average for public investment. It implores the Chancellor to “prioritise public spending in areas such as health, education and tackling climate change above tax cuts, as a means to increase productivity, deliver economic prosperity and support the transition to a zero-carbon society”.

A specific call for the creation of a Net-Zero Investment Plan, including sector-specific emissions pathways and technology trajectories, is included in the letter – as is a plea for a comprehensive update to funding education, upskilling and reskilling in line with net-zero and with the digital transition.

Tackling energy poverty and supporting homes and businesses through the continuing energy price crisis should be another Budget Box priority, the letter emphasises. It states that low-cost loans and further grants could help homes, farmers and small businesses meet the short-term upfront costs of the transition while building in long-term savings and resilience.

A clean manufacturing focus

Late last year, the Government announced a £4.5bn package of grants and loans for British manufacturers in sectors deemed to be essential to the net-zero transition and to the nation’s economic growth. This package, known as the Advanced Manufacturing Plan, included £2bn for automakers seeking to produce electric models plus £960m for manufacturers of clean energy components.

This was built upon on Monday (4 March) with the provision of an extra £73m for electric vehicle technology innovation and a £200m joint investment in low-carbon aircraft manufacturing.

Nonetheless, trade bodies including the CBI and Make UK have urged the Chancellor to go beyond one-off funding announcement and stick to a clear, long-term modern industrial strategy.

Make UK CEO Stephen Pinson told an audience in Westminster last week that businesses “need a return to political and policy stability”, including slower turnover in Cabinet Ministers plus tax policies “for the lifetime of a Parliament, which would only be changed if exceptional circumstances merit it”.

Electric vehicle adoption incentives

The UK Government was recently warned by a Lords Committee that, despite interventions to prepare automakers for the EV transition, far more needed to be done to make EVs accessible and desirable to most of the general public. They cited issues including misinformation, low provisions of public chargers in some regions and  the upfront costs of EVs.

Now, a coalition of organisations including Auto Trader, E.ON and FairCharge is calling on Hunt to “revisit out-of-date VAT legislation” at the Budget. They specifically want VAT on public charging point use, currently set at 20%, brought in line with the 5% rate applied to charging at home.

This change “would be very small compared to the hundreds of billions spent supporting fuel duty”, the Coalition said in a letter. Fuel duty has been frozen since 2011.

The Society of Motor Manufacturers and Traders (SMMT) is similarly asking hunt to halve VAT on the upfront cost of a new EV, extending a VAT cut already applicable to home solar panels and heat pumps.

This move, it has stated, would support drivers who feel an EV is out of reach following the end of the Plug-In Car Grant. It estimates that the change could push 270,000 more EV adoptions in the next three years.

“The Chancellor must end the perverse fiscal system that discourages drivers from moving away from fossil fuels, and send a clear signal that the time to go electric is now,” said SMMT chief Mike Hawes.

Clarity on scaling carbon capture and storage

The biggest green economy announcement at the Spring Budget last year was that of £20bn for the UK’s carbon capture and storage (CCS) industry, to be allocated from Government coffers over a 20-year period.

Industry body the CCS Association stated last month that its members have received no clear answer on how and when the initial funding will be provided, or on any subsequent funding scheme.

The Association implored Hunt to provide this clarity at or around the 2024 Budget, along with a request for an uplift in the total funding commitment of at least an additional £16bn. This level of investment, the body argued, is necessary to ensure the UK remains competitive with markets like China, the US and the EU.

It bears noting that the Conservative Government U-turned in 2015 on its first landmark CCS pledge, announcing and then recalling £1bn of competition funding for the sector.

What would you like Hunt to include at the 2024 Budget? Let us know in the comments.