DECC budget cuts threaten ability to ‘keep the lights on’

Conservative manifesto pledges equate to a 3.3% cut in public spending over the course of the next parliament. However, health, international development and education have been ring-fenced, meaning cuts must fall harder on other departments, including DECC.

Making matters worse, almost 70% of DECC’s budget is ‘locked in’ over the next five years, largely for cleaning up old coal and nuclear projects. As a result, the budget for resource spending, which is mainly spent on staff costs, could fall from £402m in 2014-15 to just £40m by 2018-19.

But these reductions could represent a “false economy”, warns a new report from the Green Alliance.

It said: “A dumbed-down DECC, unable to spend its own budget wisely on analysis, energy efficiency and strategy, might overspend on levy-funded low carbon generation, driving up the cost of decarbonisation.”

Core reductions

The report also warns that policies such as smart metering and carbon capture and storage, will also be stripped back.

Green Alliance director Matthew Spencer said: “Less than a fifth of DECC’s budget is spent on its core mission of reducing energy costs and accelerating low carbon energy investment.

“Spending reductions will focus on these areas because the department is lumbered with huge historic liabilities from the nuclear and coal industries.

“The government’s ability to get a good deal for current consumers and future citizens will decline rapidly unless DECC gets a much better settlement than predicted in next week’s Budget.”

‘Pure speculation’

Chancellor George Osborne announced a package of cuts at the start of June, including £70m from the DECC budget, but the Green Alliance said it was unsure if this was in addition to, or instead of further cuts in next week’s Budget.

DECC played down the idea that its effectiveness could be diminished, telling edie: “Through making savings from underspends last year we have been able to protect spend on priority areas for 2015/16 including keeping the lights on and reducing greenhouse gas emissions.

“DECC’s budget will be set out by the Chancellor and any estimates before that are pure speculation.”

‘Historic imperative’

The Green Alliance report has already seen support from a group of eight influential energy academics, who have written to the minister for government policy, Oliver Letwin, urging him to consider its findings.

One of the authors of the letter, Paul Ekins, a professor of Resources and Environmental Policy at University College London, added: “The prime minister went into the general election with an admirable commitment to deliver a low carbon energy system for the UK.

“DECC civil servants are already very stretched in delivering this historic imperative. We are concerned that the next round of budget reductions could inadvertently undermine the government’s ability to complete its important energy market reforms and deliver climate policy. 

The full letter to Oliver Letwin

Brad Allen