One thing above all else is driving Britain’s economic woes: our heavy reliance on gas for electricity and home heating. That is why energy prices have soared following Vladimir Putin’s invasion of Ukraine, pushing up inflation and public debt and leaving our economy languishing.
If Jeremy Hunt, the Chancellor, is going to be successful in balancing the nation’s books and growing our economy, he needs to accelerate our efforts to reach net-zero greenhouse gas emissions. For all the belt-tightening and public spending pressures, the Autumn Statement rightfully puts clean energy and insulation at the heart of the government’s economic plans.
It is no small thing that the Chancellor used his statement to reaffirm the UK’s commitment to the Glasgow Climate Pact. With countries looking to the UK’s example at Cop27, the UN climate conference, and some siren voices at home calling for net zero to be delayed, Hunt sent a clear message by reiterating that the UK’s target is for a 68 per cent reduction in emissions by the end of the decade.
Since 1990 we’ve grown our economy by 78 per cent while cutting our emissions by 44 per cent, proving to other nations that clean growth is not only possible but increasingly represents the only route to prosperity. With the UK now in recession, thanks to an energy crisis inflicted on us by Russia, the clearest path back to prosperity is through cheap and clean renewable energy, new nuclear and energy efficiency.
Underpinning the statement’s message about the UK’s continued climate leadership are bold commitments: a target to reduce energy consumption by 15 per cent by 2030, confirmation of our first state-backed nuclear power station in thirty years, and a further £6bn of funding for insulation.
The Sizewell C announcement is excellent news for the east of England. It ends the dither and delay around the building of low-carbon nuclear power and unlocks a project that will create ten thousand skilled jobs and power six million homes. Even with the nation’s finances stretched, this decision shows the UK is rejecting short-term thinking when tackling climate change and strengthening our energy security.
A sustained focus on energy efficiency and reducing waste is well overdue; for too long it’s been the weak link in the UK’s net-zero and energy security strategies. Nearly 19 million British homes are poorly insulated, contributing to climate change and leaving people with more expensive energy bills. Solving this problem will be crucial for us in reaching net zero and will permanently cut people’s energy costs.
The challenge of upgrading the UK’s housing stock is enormous. To meet the Chancellor’s target, the new energy efficiency taskforce must look beyond grants to insulate fuel-poor homes and assess more creative incentives such as energy-saving stamp duty and low-cost loans. These could be designed to be revenue neutral, not costing the Exchequer anything but boosting insulation rates among homeowners.
Given the tremendous cost of shielding people and businesses from the gas crisis – the equivalent of paying for a second NHS – a windfall tax on energy firms is understandable. Oil, gas and indeed some renewable companies are earning tremendous profits as wholesale energy prices rocket. Temporary windfall taxes can help us pay for policies to protect people from these high prices.
However, the Chancellor’s inclusion of renewables in the new tax may deter the investment we need to end our reliance on fossil fuels. These are the same companies we hope will invest billions of pounds in accelerating the renewable energy transition, powering the UK with cheap energy. Only through attracting private investment has the UK successfully grown its capacity in renewable energy – which now provides around 40 per cent of our electricity compared to 7 per cent in 2010 – and driven down its cost.
To meet the government’s ambitious targets we need to attract more private investment and not deter it through inflexible windfall taxes. That is why it is concerning to see electricity generators missing out on an investment allowance for new wind and solar projects.
Nonetheless, while the windfall tax is an area of concern, the Chancellor’s statement represents a big step in the right direction. In the wake of the war in Ukraine, any credible government plan to balance the books must prioritise renewables and insulation. We can only overcome these challenges with the dynamism of British industry and our country’s vast wind power potential.
If we are going to be a global leader in offshore wind power and a pioneer of floating offshore wind technology, there is a strong case for tax incentives to encourage new investment. It doesn’t mean helping energy firms avoid tax, but it does mean encouraging them to invest in our country’s clean future for the sake of our planet, future prosperity and energy security.