As households and businesses feel the squeeze from the cost-of-living crisis, the spotlight was firmly on the Chancellor today to ease the mounting pressure with his Spring Statement. The impact of the Ukraine war combined with high global inflation and continuing supply chain pressures means the OBR now forecasts UK growth this year at 3.8% with inflation expected to average 7.4% this year.
Many green groups and businesses had hoped that the statement would prioritise support for energy efficiency and decarbonisation; key to tackling fuel poverty, securing energy independence and meeting net zero.
However, low carbon announcements were thin on the ground. With the Energy Security Plan still being drawn up, we may hear more soon: Sunak promised “further measures to reinforce our long-term energy security in the coming weeks”.
In the meantime, here are the green announcements, at a glance:
Green reliefs for business rates – brought forward
To support the decarbonisation of non-domestic buildings, the government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. The Spring Statement announced that these measures will now take effect from April 2022, a year earlier than previously planned.
VAT relief for domestic energy saving materials
Over the next 5 years, homeowners installing energy efficiency and decarbonisation measures such as solar panels, heat pumps and insulation will pay zero VAT instead of the current 5%. Sunak said that being in the EU had made current eligibility rules complex, but that he could now “abolish the red tape”. He said the government would also “reverse the EU’s decision to take wind and water turbines out of scope – and zero rate them as well.”
A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills. The changes will take effect from April 2022
Temporary cut to fuel duty
Fuel prices have reached their highest ever levels. In a move that sits uncomfortably outside the low carbon agenda, Sunak announced a temporary 12-month cut to duty on petrol and diesel of 5p per litre. This measure represents a tax cut of around £2.4 billion over the next year.
The statement says “When compared with uprating fuel duty in 2022-23, cutting fuel duty to this level delivers savings for consumers worth over £5 billion over the next year and will save the average UK car driver around £100, van driver around £200 and haulier around £1,500, based on average fuel consumption.”
You can read the Spring Statement in full on the government website.