Budget Review 2016

George Osborne’s eighth budget took place today with energy related announcements covering a paltry 85 seconds of his speech.

Posted on 17 March 2016.

 

Related article: “What will Brexit mean for climate change management?>>>

In terms of the UK plc big picture there have been downgrades to borrowing but also productivity, with the overall budget seemingly to maintain the position of achieving a budget surplus by the end of the parliament but no doubt with the new sugar tax deflecting this news from the morning papers!

Meanwhile there were basically only two major energy announcements:

  • Maintaining the freeze on fuel duty

  • Scrapping of the Carbon Reduction Commitment (CRC) in 2019

The Chancellor announced last summer that he was looking to wrap all the energy taxes into one simplified energy tax regime covering CRC, GHG, CCAs and ESOS, with reporting through the Climate Change Levy (CCL) as one lump sum to business. The truth is that whilst there will be some simplification (in 3 years’ time) it only affects CRC which will close at the end of the 2018-9 compliance year. Revenues will instead be recovered through an increase in CCL though energy intensive industries such as steel and chemicals will be permanently exempted.

Four years of Climate Change Levy main rates have been announced with a steep rise in 2019:

Taxable commodity

Rate from 1 April 2016

Rate from 1 April 2017

Rate from 1 April 2018

Rate from 1 April 2019

Electricity (p/kWh)

0.559

0.568

0.583

0.847

Natural gas (p/kWh)

0.195

0.198

0.203

0.339

In terms of maintaining the freeze on fuel duty (when fuel is already too cheap) one can only wonder what future generations will think of our inaction to use price to incentivise conservation. Why use this type of mechanism on cigarettes or a sugar tax but not on energy?

A commitment was made in preparation for the Paris COP 21 during the Autumn Statement in November that ‘climate finance would be increased by 50% over the next five years’ but no further details were announced.

During prime ministers question time Cameron set the scene on energy issues for the Chancellor’s eighth budget by arguing of “a remarkable record in green energy”, stated that “since 2010 greenhouse gases have been reduced by 14%” and that on renewable electricity, UK is “on track to deliver 30% from renewable sources by 2020”. Only time will tell.

Jes Rutter, Managing Director, JRP Solutions