Cutting the mustard: Was Jeremy Hunt’s Budget on the nail for green business?
Whether you feel Jeremy Hunt’s Budget cut the mustard this year largely depends on the vision you have for the UK’s sustainable business sector. Our Energy Team explains why.
Measures did appear in the Budget that will be welcomed by many, to keep businesses firing and to help grow certain elements of low carbon technology.
However, it’s hard not to come away with a sense that as ever, there’s no overarching commitment to clean business at the pace required to help meet Net Zero targets.
Let’s elaborate on the wins and fails.
Fossil fuel subsidies
If you’re in the know, you will have spotted stealth measures in the Budget to keep helping fossil fuels companies get a leg up.
The BBC explains that Prime Minister Rishi Sunak introduced the 25% Energy Profits Levy when Chancellor.
In the 2022 Autumn Statement, present Chancellor Jeremy Hunt announced it would increase to 35% from January 2023, and run until March 2028.
It was previously due to finish at the end of 2025. Now, to explain; the levy applies to profits made from extracting UK oil and gas, but not from other activities – such as refining oil and selling petrol and diesel on forecourts.
The opposition has criticised the scheme because it also lets firms claim tax savings worth 91p of every £1 invested in fossil fuel extraction in the UK. That allowance continues.
The BBC elaborates that oil and gas firms have been able to reduce the amount of tax they pay by factoring in losses or spending on things like decommissioning North Sea oil platforms. In recent years, such methods have meant that BP and Shell have paid almost no tax in the UK.
In fact, BP and Shell both received more money back from the UK government than they paid every year from 2015 to 2020 (except 2017, when Shell paid more than it received). Shell also paid a negative amount of tax in 2021, taking its 2015 to 2021 total to -£685m of tax in the UK.
This fossil-biased system hasn’t been altered in the slightest in the Budget, and self-evidently it is in clear contradiction of the UK’s Net Zero promises.
To put all this in context, The FT writes that recently, ExxonMobil, Chevron, BP and Shell have reported their combined annual profits for 2022 added up to a record-crushing $160bn.
The FT says that a different idea British academics have been pushing is gathering pace, and it has made it into the Net Zero review. It would make fossil fuel companies pay to clean up their carbon emissions in a way that would create a safer climate at a relatively affordable cost through carbon capture and storage.
No matter your views on these, the point is that the existing system is broken to the tune of billions and tonnes of CO2, and nothing in the Budget touches it right now.
This kind of issue dwarves smaller positives in the Budget.
Net Zero Strategy
The Guardian ponders that Energy Secretary Grant Shapps promised a far greater green push to come, after the Budget.
The government is obliged by a high court ruling last year to publish by the end of this month clear plans on how to reach the Net Zero target. A response to the review of the Net Zero target by Chris Skidmore, published early this year, will come out at the same time.
So is it possible the Government is keeping its powder dry, with the big measures we need on Net Zero to come post Budget?
Other oddities in the Budget include the fact Hunt announced no new spending on home insulation, and did not bring forward spending on energy efficiency allocated for 2025, despite clear research showing that insulation can keep people’s homes warmer amid high energy bills, and calls from the government’s own statutory climate adviser, the Climate Change Committee, to prioritise insulation.
Climate Group opinion
Climate Group’s chief executive Helen Clarkson told edie that the US, EU and China are overpowering the UK in the race to decarbonise, and unfortunately, this Budget falls short of offering a plan to compete for green investment.
“While Chancellor Jeremy Hunt nodded to the UK’s past achievements on expanding offshore wind and rooftop solar, this Spring Budget overlooks cheap and clean renewable energy, and instead rebrands nuclear as ‘environmentally sustainable’ and throws cash at carbon capture technology.
“This was a missed opportunity to renew the UK’s commitment to climate leadership, seriously invest in energy efficiency, speed up the electric vehicle switch, stop subsidies for fossil fuels and increase onshore wind.”
But Richard Lum, Co-CIO at Victory Hill Capital Partners LLP, advisor to VH GSEO, said the £20bn move by the chancellor to support carbon capture is a healthy step in the right direction, that will help ensure the UK continues to lead the world in applying this technology.
And Greg Jackson, Founder of Octopus Energy, said the extension of the energy bill support is a huge relief for millions of customers. “Wholesale costs are falling, but they are still significantly higher than normal levels. This help is vital not only for households, but also for helping the economy and tackling inflation.”
So, the upshot is, there is stuff of positivity in the Budget. But is there a true alignment to Net Zero and a genuinely powerful push to hit climate targets? No.