Chancellor Healey’s plan offers targeted relief against soaring energy costs
Delivering his first Budget since becoming Chancellor of the Exchequer, John Healey made his priorities clear. In the face of ‘global economic storms’, his plan is to offer ‘breathing space’. This means short-term help with mounting costs – especially energy. Here is our quick summary of the energy and carbon-related measures he outlined.
New Energy Wealth Fund
Following the controversial decision to permit drilling at the Jackdaw gas field, today the Chancellor announced a plan for North Sea oil and gas revenues. Tax raised from the fossil fuel industry will go into an Energy Wealth Fund, to be invested in clean energy projects. The fund will be launched with £2 billion from the Treasury.
BICS backdated payments reaffirmed
The British Industrial Competitiveness Scheme (BICS) comes into force in April 2027. Healey reiterated today that businesses will get a one-off backdated payment, in lieu of the support they would have received if the scheme had come into force in April 2026.
New rule for energy projects
The Autumn Budget 2026 brings a new rule for generation projects: “We will only buy and build new projects when they bring bills down and they can get a grid connection.” He also spoke of “reforming the complex web of institutions that govern the system”. Delays with grid connections have long been a problem for the energy transition. Healey’s predecessor Rachel Reeves announced measures in the 2025 Autumn Budget, but today’s rule goes further.
Deal for data centres
The UK is the third largest AI market in the world and the government plans to integrate artificial intelligence further into public services. But to avoid relying on other countries for the computing power needed, it estimates we need an additional 6GW of energy capacity for data centres by 2030. To reduce opposition from communities, Healey announced a British Data Centre Covenant. Essentially, this requires data centres to reduce the negative impact on the areas where they’re sited, in exchange for grid access. The Data Centre Covenant asks data centres to:
- Pay for their fair share of energy
- Invest in local communities
- Create jobs
- Use water and energy wisely
Fixed-price contracts for older renewable projects
The Renewables Obligation (RO) scheme closed to new generation projects in 2017, but it still supports more long-standing projects. The payments they get are linked to the market price for electricity, which in turn is linked to wholesale gas prices. So surging gas prices push up the price of a MW of electricity from an older wind or solar farm.
Long before the Autumn Budget, the government had already announced plans to move these older projects to fixed-price contracts. The Chancellor confirmed today that this is going ahead. This will put older projects on a similar footing to newer renewables funded through Contracts for Difference. Crucially for consumers, it will help to de-link our electricity prices from volatile gas markets, keeping costs down.
Fuel duty frozen again
Fuel duty has been frozen again, for the 16th year in a row.
The 5p cut in fuel duty, originally brought in by Rishi Sunak in spring 2022 as a temporary measure, has also been extended. It was due to end in January 2027, but will now continue until the end of June 2027.
Hydrogen costs shifted
The Starmer government’s plan for funding low-carbon hydrogen production included a levy called the Hydrogen Production Levy. This was intended to sit within a wider Gas Shipper Obligation (GSO), paid by licensed gas shippers. Today, the Chancellor announced that the GSO will not go ahead. Instead, hydrogen investment will be funded by the government.
Net Zero commitment reasserted
The Autumn Budget 2026 speech included a repeated commitment to net zero. “We remain unshakeably committed to net zero by 2050. This will require deep reform of the energy system.”
Help for households
We’ve focused on how the Autumn Budget will affect businesses, but there were also some important measures for domestic energy users.
- The headline announcement for home energy users is the abolition of the gas standing charge on domestic bills, possibly from 2027. This will cut bills for most households in Great Britain. Lower energy users will see the greatest benefit, so this will be welcome news for households scrimping on heating.
- The Chancellor said that there were ‘similar reforms to follow’ for electricity bills, but there were no solid announcements in his Autumn Budget speech.
- We already knew that VAT was coming off household electricity bills from October. Today it was announced that it will stay off until July 2027.
- There will be a £100 one-off payment to help with energy bills for households with homes in council tax bands A-D. This is about 20 million households.
We have contacted the Treasury to ask if there will be any change to the gas standing charges paid by businesses. The new Chancellor clearly recognises that the same forces are pushing up prices for both business and domestic energy users. As Healey said in his Budget speech: “The cost of living and the cost of business are the same.”