‘Oil and gas companies aren’t the ones in need of help this year’: Green economy reacts to the Spring Statement

Image: Rishi Sunak

Sunak delivered his Spring Statement today (23 March) against a backdrop that would be challenging for any Chancellor; rising energy prices, pushed higher still by Russia’s invasion of Ukraine, have resulted in a cost of living crisis. The Office for Budget Responsibility is forecasting that inflation will average 7.4% this year – a 40-year high. This is likely to result in the biggest year-on-year fall in living standards since records began in 1956-7.

The Government has faced calls to go further on net-zero and nature in the face of this challenge, delivering a recovery that is equitable and has benefits for people and planet as well as easing the strain on household and business budgets. But it is also dealing with a growing and vocal movement urging back-tracking on overarching climate targets and a short-term turn to fossil fuels.

With this in mind, the Statement was something of a mixed bag in climate terms. Welcome announcements included the removal of VAT on home energy retrofitting products and services for five years, including home solar. Less welcome inclusions included a cut to fuel duty.

Here, edie rounds up all the responses to the Spring Statement from key figures and groups across the UK’s green economy.

Shadow Chancellor Rachel Reeves: “Who does the Chancellor prioritise? He continues to defend the record profits of oil and gas producers who, themselves, admit that they have more money than they know what to do with. BP describes this crisis as a cash machine for them but it is British people who are paying out. 

“Today, the Chancellor comes along after 12 years of failure on energy efficiency and announces a VAT cut on building materials. This is wholly inadequate. A proper energy efficiency scheme, like the one we have set out, would cut bills by up to £400 for people from next year.

“And the silence from the Chancellor on our energy-intensive manufacturing industries is appalling. At this time of national crisis, people and businesses need a government that is on their side.”

Green Party MP Caroline Lucas: “With the triple threat of a climate, energy and cost of living crisis gripping the nation, we needed transformative action from the Chancellor today – yet this Statement feels like a damp squib.

“We know that the fastest, cheapest and most effective way out of these crises for families up and down the country is not by building an ever-bigger energy tap comprising more oil from Saudi Arabian despots, or by locking ourselves into decades of new North Sea gas, when gas got us into this mess in the first place. It’s by plugging the enormous holes in our homes – some of the leakiest in Europe – to reduce energy demand, slashing household bills and creating hundreds of thousands of jobs in the process.

“The VAT cut on energy-saving materials is, of course, welcome, but a measure which alone fails to meet the scale of the challenge we face. The Chancellor should also have committed to an ambitious nationwide energy efficiency programme to deliver warm homes, lower bills and thousands of green jobs – a retrofit revolution fit for the 21st Century. And it could have been partly funded by a £4bn windfall tax on fossil fuel companies’ obscene profits, who in their own words currently have ‘more money than they know what to do with’, and by ending the incredibly generous tax reliefs and other subsidies that the oil & gas industry currently receives.

“But instead this Statement, with a climate-shaped hole at its heart, delivered little more than disappointment. The Chancellor obstinately refused to uprate benefits and drop his widely panned National Insurance rise – which adds salt to the wounds of the worst off when bypassing billions in potential tax revenue on fossil fuel giants to ease household bills.”

E3G’s senior researcher Euan Graham: “A windfall tax on oil and gas companies would give more support to the millions of households having to choose between heating and eating. The UK already offers some of the most generous tax breaks in the world for oil and gas companies, which are making unexpected record profits. More drilling won’t help families reduce their bills. These companies are not the ones in need of help this year.” 

Aldersgate Group director Nick Molho: “We strongly welcome the Chancellor’s announcement to remove VAT from a broad range of energy efficiency and renewables investments in homes. These measures will help make domestic energy efficiency and clean energy projects more attractive and help lower consumer bills.
 
“However, in light of the significant energy security and gas price crisis facing the UK, the Government should also be looking at introducing supplementary measures to drive greater investment in energy efficiency and low-carbon heat in homes. These could include the introduction of regulatory energy efficiency targets, incentives introduced through the UK Infrastructure Bank such as 0% interest loans for energy efficiency measures and further grants for heat pumps, as well as a dedicated programme to accelerate skills development in energy efficiency and low-carbon heat installation.

“We welcome the announcement to use tax reform to promote greater investment in skills and innovation. Increasing investment in these areas is not only essential to improving the UK economy’s productivity, but also to accelerate low carbon investment in key sectors like energy, transport, heavy industry and buildings.

“Keeping the UK on track to meet its net-zero emissions target has a key role to play in driving investment and job creation across the country in areas such as electric vehicle manufacturing, offshore wind, insulation and heavy industry.

The Climate Coalition’s head of campaigns and politics Bronwen Smith-Thomas: ‘While millions are fearful of their soaring energy bills arriving through the post, investing in Britain’s leaky homes and buildings is a winner for reducing bills, a winner for tackling climate change causing emissions and a winner for stimulating jobs in the green economy. 

“This Government keeps missing an open goal to deliver the long-term solutions to energy insecurity and protection for household budgets. The Chancellor is failing to properly invest in homes and buildings energy efficiency across the country, and failing to step up and properly fund a transition away from soaring oil and gas costs toward cheaper and renewable British energy.”

Ashden’s cities manager Cara Jenkinson: “If the Government really wants to build a stronger and more secure economy and tackle the cost-of-living crisis, then then they must invest now in training thousands of people to roll out an urgent nationwide campaign of energy efficiency measures, such as retrofitting housing, and installing heat pumps. The cut to VAT on these measures is welcome, but not enough to drive the scale of change needed.  

“Instead, this was another piecemeal announcement that not only undermines the government’s own net-zero targets but also leaves heat leaking out of homes and money draining from people’s wallets.  If we want to insulate the UK from rising energy prices, we must invest in energy efficiency measures and skills needed to carry out the work urgently. We needed bold action – we did not get that today.

“In terms of the fuel duty cut – this flies in the face of net-zero targets, and mostly benefits wealthier people – it would be better to increase benefits in line with inflation.”

The University of Sussex’s professor of energy policy professor Steven Sorrell: “The cut to fuel duty may be politically popular, but it is an ineffective and unfair response to the cost-of-living crisis.

“While nearly half of poor households do not own a car, many rich households drive long distances in gas-guzzling SUVs. Since the richest 10% of UK households spend six times more on fuel than the poorest 10%, most of the benefits go to the wealthy.

“Oil companies benefit from higher demand and they may respond to the policy by adjusting their prices – which inflates their profits. At the same time, the fuel duty cut slows the transition away from fossil fuels.

“Not everyone drives, but everyone needs to heat their home. Instead of cutting fuel duty, the Government should prioritise help with household heating bills – including scaling up investment in energy efficiency.”

Green Alliance’s policy advisor Helena Bennett: “Cutting fuel duty is not the most effective way to help those on the lowest incomes who often don’t own a car; there’s nothing in the Chancellor’s statement that will make public transport cheaper or easier for people.

“If fuel duty stays low when oil prices fall, it will also make it less attractive for drivers to move to electric vehicles, which we know are cheaper to run over the course of their lifetime. Rather than making fossil fuels cheaper and going looking for alternative sources of oil, we need to reduce our reliance on fossil fuels as a whole.”

IEMA’s chief executive Sarah Mukherjee: “We welcome the Chancellor’s announcement that the Government will incentivise investment in skills, training, and research and development, which will create opportunities to unlock further private sector funding to accelerate the UK towards a net-zero future. IEMA will work closely with the Government and industry to ensure green skills are central to this programme.

“The removal of VAT on home energy efficiency and renewables is also a positive step that supports the net-zero transition and enhances our energy security. 

“While we recognise the need to address the cost-of-living crisis and the 5p/litre cut in fuel duty, a key medium-term test of the government’s climate change ambition will be whether it invests more in lower carbon transport including walking and cycling.”

Energy and Climate Intelligence Unit (ECIU) analyst Jess Ralston: “Removing VAT on energy efficiency products such as insulation is an immediate boost for families facing soaring gas bills – but there are lots more tools within the Chancellor’s grasp for getting off Russian gas and reducing household bills.

“Low-interest loans have been hugely popular in Germany and could unleash private sector investment into sealing up our leaky homes, while net-zero policies like incentivising the switch away from gas boilers will help to shield Brits from future fossil fuel market volatility.

“More announcements are expected in the Prime Minister’s upcoming energy security strategy, and to truly insulate homes from sky-high gas bills in the longer term, more levers will need to be pulled.”

The Environmental Industries Commission’s chief executive Stephen Marcos Jones: “Rising inflation is the backdrop to the Chancellor’s update with the official forecast peaking at around 9% in 2022. The resulting impact – coming after what have been two extremely challenging years – means difficult times ahead for all businesses in all sectors.

“While our members may not be as exposed as those working in other sectors, inflation affects every organisation which is why we would have welcomed more proactive, immediate and targeted moves to alleviate current inflationary pressures on UK Plc. 

“The review of UK’s approach to R&D investment, with a wider scope and promise of increased relief is welcome. We, of course, wait to see the detail, but this has the potential to unlock more innovation from the private sector while contributing to increasing productivity. We were also pleased to see VAT cut on energy-efficiency materials such as solar panels, heating pumps and roof insulation from 5% to zero for five years. This not only has the potential to cut people’s fuel bills, but help us deliver a sustainable future.

“We would have liked to have seen more measures to support longer-term Government ambitions around net-zero and levelling up. The Statement was a missed opportunity to make progress in these areas and use them as drivers for economic growth and recovery.”

Environmental Audit Committee chair Philip Dunne MP: “Removing VAT on energy efficiency measures – as we called for in our Energy Efficiency report – is a significant win for the sector that has been calling for this for a long time. In evidence to our Committee, we heard how VAT is the largest obstacle to homeowners making low carbon improvements.

“The Chancellor said this would add up to £250m tax cut to energy efficiency. A homeowner installing rooftop solar panels could save £1,000 on installation and cut their annual energy bills by £300.”

Crowe partner Simon Crookston: “It is encouraging that the Chancellor has provided VAT cuts for solar, wind and water turbines and other green initiatives, particularly in relation to renewable energy.  However, this does not help families that are struggling to pay their fuel bills today. They won’t be able to afford the capital investment, and, therefore, will not benefit from these energy incentives.”

TLT partner Robin Penfold: “With the war in Ukraine and the cost of living crisis, the context of this Spring Statement felt worlds away from Sunak’s Budget delivered in the lead-up to COP26.

“However, the Chancellor has a golden opportunity to further COP26 goals and drive growth as the Government works through the details of planned tax reforms. The overhaul of business taxation to boost investment announced today should consider tax incentives for companies and investors financing climate-friendly initiatives and subsidies or grant schemes for green projects. Our research shows that these measures are top of the investment industry’s wish list to help unlock more finance flows towards green initiatives. Rishi Sunak’s shake-up of R&D and the wider tax credits regime offers the perfect moment to bring them in.”

Storegga’s chief executive Nick Cooper: “The UK energy industry will be largely disappointed by today’s announcement: there was no rabbit out of the hat for carbon capture and storage and hydrogen as hoped.  We have an opportunity to decarbonise the British energy industry, whilst also securing supply.  But today’s statement does not give us the broader decarbonisation rollout we so desperately need.”

Greenpeace UK’s policy director Dr Doug Parr: “Even in the middle of a climate crisis and geopolitical upheaval, there is no need for the richest countries in the world to fail their citizens when it comes to basics like heating and eating.

 

“The switch to efficient, sustainable, resilient systems that are not dependent on price-volatile imports from unstable regimes is long overdue, and our slow progress so far will cost us. But we do know how to get off gas – efficiency in the short term, and electrification with renewable energy as soon as possible after that. Plans have been researched, trialled, and in many cases, promised by the government. All we need is to recognise those plans as the national priorities they always should have been, and get on with it.”

npower Business Solutions’ chief operating officer Anthony Ainsworth: “Although the Spring Statement is always designed to be a ‘mini Budget’ ahead of the full Budget in the Autumn, it was hoped that there would be more announced to support businesses – particularly those in energy-intensive industries – facing growing energy costs and increased supply chain issues while still recovering from the impact of Covid-19. 

“However, the Chancellor seemed to defer to the forthcoming Energy Security Strategy, which is due to be published imminently. It is vital that this supports businesses to help them invest in measures to become more energy resilient and energy-efficient to help counter the rise in prices caused by the highly volatile wholesale markets.

“We had also hoped to see confirmation that the super-deduction tax incentive introduced for plant and machinery in the March 2021 Budget could be made permanent for any green-related technologies. However, the Chancellor announced that it is considering options ahead of the Autumn Budget later this year to gather the views of businesses and assess its impact.”

DS Smith’s head of government, community affairs and sustainability, Wouter van Tol: “The price of energy is affecting homes everywhere, and the targeted support for households announced by the Chancellor is to be welcomed. But it’s a reality that the price of energy is affecting UK industry, as well as UK homes. Like other manufacturers, we are committed to the UK, but the energy to deliver goods and services here comes at nearly double the cost of that in Europe. Looking ahead, businesses’ ability to invest in UK growth, UK jobs, and UK-grown green tech, could become compromised without government intervention, so we welcome the commitment to reform R&D tax credit and to cut tax rates on business investment in the autumn.

“Right now, the priority for government must be to secure energy supplies, but this must be balanced with the longer-term need for clean energy. Whatever the future energy solution – nuclear or otherwise – it cannot happen overnight, and investment in lower carbon-emitting energies will be needed soon, to bridge the gap. To facilitate this, Government must do two things. The first, urgently move to classify alternative energy sources – in particular biomass and biogas – as low carbon transitional fuels. These are needed to reduce emissions while zero-carbon energy sources are being developed for the long term. The second, invest in the evolution of existing energy distribution infrastructure – the electricity and gas grids – to make them ready to support alternative energy sources like electrification and hydrogen.

“Against a backdrop of uncertain supply and increasing costs, this will create the favourable conditions that industry needs to invest for growth. Not only will this expedite our energy transition, it will bring greater energy security – something we can all agree everyone in the UK needs – and present opportunities for UK plc.”

Ecology Building Society’s chief executive Paul Ellis: “Ecology has been a longstanding campaigner for VAT to be slashed on insulation and other energy-saving measures, so the removal of VAT is a welcome first step to help create low carbon healthy homes and reduce spiralling energy bills.

“Despite this, the Chancellor’s Spring Statement was another missed opportunity to put sustainability and green building truly at the heart of tackling the cost of living crisis and reducing our dependency on fossil fuels.

“The cost of energy efficiency improvements will still be out of reach for many, so we urgently need a National Retrofit Strategy to kickstart the retrofit revolution and make warm homes affordable for all, as well as reaching the Government’s goal of net-zero emissions by 2050. 

“We’d like to see the Government deliver on a wide-ranging package to support green building including grants; stamp duty reform to incentivise creation of energy-efficient homes; tightening building regulations; building the retrofit supply chain and driving the market for green finance. “

MCS Charitable Foundation’s director of external affairs David Cowdrey: “The Chancellor has used the Spring Statement as an opportunity to kick-start the home heating revolution by zero rating VAT on home energy efficiency and renewable technologies for five years, after a successful campaign by the MCS Foundation and our partners.

“Reducing VAT will really help the sector and place the retrofitting industry on the same footing as new builds, but we also need the government to make sure that all new homes are built with heat pumps and solar PV, so they are fit for the future.”  

The Energy Saving Trust’s chief executive Mike Thornton: “Tackling the cost-of-living and energy crises must go hand in hand with meeting net-zero ambitions and reducing costs in the long-term. UK energy bills are already nearly £2.5bn higher than they would have been had green policies not been scrapped over the past decade.

“It is, therefore, good news that VAT will be cut to help homeowners install renewables and energy efficiency measures such as heat pumps, solar panels and insulation that will help reduce the UK’s reliance on fossil fuels, as well as help tackle rising fuel bills. But the UK Government still needs to go further. Instead of cutting fuel duty, the UK Government could be investing more in its existing energy efficiency programmes, offering lower energy bills year on year to struggling households and reducing emissions.”

The Association for Decentralised Energy’s director of policy and research Caroline Bragg:  “The support announced today by the Chancellor, including the VAT cut to energy-saving measures which we have campaigned for extensively, is welcome. However, these measures are not enough on their own to combat the extreme rise in the cost of living that many households are facing. More action from Government is needed. 

“Further, while it is encouraging that the business rates relief for low-carbon heat networks will now be brought forward, many heat network customers are facing unsustainable price rises. It is disappointing that no further measures were included regarding this.”

Enzen Group’s head of UK and Europe Sanjay Neogi: “In the face of soaring energy bills, rising global temperatures and accelerating geopolitical conflicts, there has never been a more pressing time for an energy strategy. And its postponement has left many unanswered questions around the UK’s plans to safeguard power supply. The crisis in Ukraine has, among other tragic impacts, bought this all sharply into focus; and today’s spring statement could have been the perfect platform to shine a spotlight on how the energy crisis can be mitigated. 

“The good news is we can overcome the current challenges by harnessing sustainable solutions. And the answer is rooted in resilience. The UK must become self-reliant when it comes to power, which includes the decentralisation and diversification of renewables, a robust cyber security system, and a more urgent focus on the infrastructure required to accommodate electric vehicles and renewable sources onto our grid.”

edie Staff

© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie

Subscribe