Spring Budget: Chancellor unveils £20bn CCS funding, energy relief support and nuclear package
Chancellor Jeremy Hunt has unveiled his Spring Budget, introducing fresh funding for carbon capture technologies, reclassifying nuclear as a “sustainable” energy option and extending energy efficiency relief for households, as a part of an ongoing effort to halve inflation, grow the economy and reduce debt. Here, edie rounds up all the key reaction.
In his first Budget speech as Chancellor, Hunt unveiled new measures to extend energy-efficiency tax breaks for businesses, a multi-billion-pound support package for carbon capture technologies and new innovation funding for nuclear, which will be officially classed as “environmentally sustainable” moving forward.
Following a PMQ that devolved into squabbling over football highlights on the BBC and discussions about the Prime Minister’s swimming habits Hunt was given an opportunity to outline how new policy measures could make the UK “a science and tech superpower”.
“In the Autumn we took difficult decisions to deliver stability and sound money,” Hunt said. “Today, we deliver the next part of our plan: a Budget for growth. Not just growth from emerging out of a downturn. But long term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people.
“Today I deliver that by… removing the obstacles that stop businesses investing;… tackling the labour shortages that stop them recruiting;… breaking down the barriers that stop people working;…and harnessing British ingenuity to make us a science and tech superpower.”
Hunt opened his Budget delivery by confirming that the UK economy is forecast to grow from 2024 onwards, rising by 1.8% next year, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
The Chancellor outlined a plethora of measures to support the economy under the four themes of “enterprise, employment, education, everywhere”. But with many businesses and households still reeling from the impacts energy, many hoped that energy relief schemes would be extended and strengthened by the Chancellor.
Energy cost relief
The Chancellor unveiled his budget just hours after the Treasury confirmed that the Energy Price Guarantee (EPG) would be kept at £2,500 for an additional three months from April to June.
The Government claimed that maintaining the EPG will be worth £160 in total for a typical household and is will prevent the public from reaching the upper limit of Ofgem’s Price Cap between April and June – which stands at £3,280. The EPG was first introduced in October 2022 to protect households from rising energy costs and the Government has consistently extended the end date of the scheme.
Taken together with previous policy initiatives to combat energy costs, the Government has confirmed that these measures bring the total support to an average of £3,300 per UK household over 2022-23 and 2023-24.
The Chancellor also confirmed an update to the Climate Change Agreement (CCA) for businesses that was first promised more than two years ago.
Back in 2020, the Government extended its CCA scheme for businesses by two years. The CCA scheme was launched in 2014 and provides businesses with tax breaks on the basis that they become more energy-efficient and reduce their Scope 1 (direct) and Scope 2 (power-related) emissions. It sets energy-reduction targets for businesses which, if met, result in a discount on the Climate Change Levy (CCL) on their energy bills.
The scheme was due to close in the first half of 2023 but will now be extended through to March 2025. Almost 9,000 facilities are currently benefitting from the CCA scheme. Hunt state that eligible business can collectively gain £60m of tax relief based on energy efficiency measures.
Hunt also confirmed that the Government would maintain the current freeze on fuel duty. In previous Spring Statements and Budgets, green economy figures have criticised the Treasury for not increasing fuel duty.
It was rumoured that a planned 11p fuel duty rise would be introduced in this Budget, but Hunt has maintained the 5p cut issued last year for another 12 months, claiming that drivers will be able to save around £100 as a result.
Carbon capture and innovation
The Treasury confirmed earlier this week that Hunt would announce £20bn for carbon capture, to be spent over a 20-year period. This is an unprecedented commitment globally.
Hunt confirmed that £20bn would be ringfenced to support the early development of CCS technologies, starting with projects on the East Coast, Merseyside and North Wales. Hunt claimed that the funding will support around 50,000 jobs and help capture 20-30 million tonnes of CO2 per year by 2030.
However, green groups had hoped for a broader package of support for a variety of low-carbon technologies. Indeed, the Confederation of British Industry (CBI) previously calculated that the UK could potentially miss out on £4bn+ of economic benefit through to 2030 by failing to promote these technologies.
Ahead of this Budget, a coalition of NGOs working on environmental and social issues have called for at least £6bn to be set ahead annually for the next decade to support the improvement of energy efficiency in buildings and the installation of heat pumps.
The coalition, including Greenpeace UK, National Energy Action and Age UK, is recommending an initial £5bn for home insulation and £3bn for heat pumps, with spending to be targeted at fuel-poor homes in the first instance. For context, the UK’s last national home insulation scheme, the failed Green Homes Grant, was backed with a £1bn pledge, while the Boiler Upgrade Scheme for heat pumps has a £450m budget. These calls failed to be addressed in the Budget.
Hunt confirmed that nuclear would officially be considered as “environmentally sustainable” and will be updated in the green taxonomy.
The Chancellor has also unveiled a new support package for nuclear in the UK, including a new innovation fund competition for Small Modular Reactors (SMRs). An innovation fund for demonstrator projects was also unveiled. It is worth pointing out that the Conservatives first confirmed a funding competition for SMRs back in 2015, but has remained undefined ever since.
The UK is aiming to host 24GW of installed capacity by 2050, meaning that nuclear supply will meet 25% of the UK’s electricity demands by mid-century. The Government has already provided Rolls-Royce with £210m of funding for its SMRs which recently went through the approval process with regulators. Hunt also confirmed the official launch of British Nuclear, which will oversee the delivery of these targets.
Hunt also unveiled the locations for 12 new “investment zones” that will each receive £80m in government funding over the next five years to scale up research and development across the pillars of digital technology, life sciences, advanced manufacturing and the green economy. Hunt claimed that the Government could create “12 new Canary Wharfs” through this funding.
Levelling Up Secretary Michael Gove said: “Levelling up means backing local growth across the UK, driving innovation to attract investment and putting power into the hands of local communities so they can reach their full potential. Our new investment zones and Levelling Up Partnerships will deliver more jobs, better services and more opportunities for local people.”
The eight places proposed innovation zones are: East Midlands Mayoral Combined County Authority, Greater Manchester Mayoral Combined Authority, Liverpool City Region Mayoral Combined Authority, a proposed North East Mayoral Combined Authority, South Yorkshire Mayoral Combined Authority, Tees Valley Mayoral Combined Authority, West Midlands Mayoral Combined Authority and the West Yorkshire Mayoral Combined Authority. The Government is yet to clarify which of these zones will be ringfenced with green economy funding.
Hunt also confirmed that corporation tax for businesses would increase from 19% to 25%, this means that for organisations that make a profit of more than £250,000, they will be taxed 25% of their profits from next month.
Elsewhere, small and medium-sized businesses (SMEs) will be able to claim credit for investments into research and development. Hunt confirmed that SMEs would be able to claim £27 for every £100 they spend in R&D provided that accounts for more than 40% of their total expenditure.
What was omitted?
While green groups will welcome efforts to beef up the energy relief support packages, Hunt’s Budget failed to introduce measures or funding for renewables, hydrogen, efficiency and planning mechanisms.
Prior to the budget, green groups called for more ringfenced funding for energy efficiency measures, as well as a greater focus on how nature can be incorporated into policy and business plans. However, these measures failed to surface during Hunt’s Budget announcement.
Hydrogen and renewables were the surprising omissions from the Budget. While nuclear is now classed as “environmentally sustainable” hydrogen needs more policy support if the sector is to transition from blue to green in alignment with the net-zero transition.
No new funding for renewables was announced, although Hunt did tout the UK’s “world-leading” offshore wind sector as proof that the Conservatives were committed to the green economy and net-zero. Green groups, however, aren’t convinced.
It may well be that renewables get more attention towards the end of the month. The Climate Change Committee’s chief executive noted on Twitter that the Government could be saving for a “green moment”, with a new (and hopefully lawful) Net-Zero Strategy and a response to Skidmore Net-Zero Review set to be published in the coming weeks.
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