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Windfall tax, insulation, Sizewell C: What the budget means for the UK’s effort to tackle climate change

From windfall taxes to cuts to foreign aid. The Independent looks at what the autumn Budget means for UK efforts to tackle the climate crisis

Saphora Smith
Climate Correspondent
Thursday 17 November 2022 17:31 GMT
How will the Autumn Budget affect you?

Jeremy Hunt’s autumn Budget will not mirror the wish list of policies advocated by environmentalists and climate campaigners in the UK and abroad.

But there are some bright spots that many will find reassuring after months of concern about the growing influence of the net-zero sceptical wing of the Conservative Party.

“With the existential vulnerability we face, now would be the wrong time to step back from our international climate responsibilities,” Mr Hunt told parliament during his first autumn statement as chancellor on Thursday.

The UK remains “fully committed” to the Glasgow Climate Pact agreed at Cop26 last year, including meeting a 68 per cent reduction in greenhouse gas emissions by 2030, he added.

Those words were welcomed by environmentalists, who are anxiously awaiting the final outcome of the Cop27 summit in Egypt that is due to draw to a close on Friday.

But, as ever, the devil is in the detail.

Here, The Independent looks at what Thursday’s Budget means for UK efforts to tackle the climate crisis.

Windfall Taxes

One headline announcement during the autumn statement was that the government will raise the windfall tax on oil and gas giants from 25 per cent to 35 per cent.

Climate campaigners have welcomed the hike in tax – burning fossil fuels is the biggest driver of greenhouse gas emissions that is causing our planet to heat up.

However, there remains criticism that the Energy Profits Levy – as the tax is called – still includes tax relief on investment in oil and gas extraction fuelling global heating.

Caroline Lucas, the Green MP for Brighton Pavilion, described it as “scandalous” that the government was keeping the investment allowance, adding that fossil fuels must stay in the ground.

What’s more, Mr Hunt announced on Thursday that it’s not just oil and gas giants that will be subject to a windfall tax on profits either, as he announced a 45 per cent tax on electricity generators.

There is frustration, including among Green Conservatives, that low-carbon electricity generators will face a higher rate of tax than oil and gas companies, with no equivalent investment incentive for new renewables.

The move means wind farms in UK waters will pay a higher windfall tax than nearby oil and gas rigs.

Mr Hunt said that together the two taxes will raise £14bn next year.

Energy efficiency

The second big takeaway is an extra £6bn to improve energy efficiency from 2025 to cut demand for expensive energy.

This has been roundly welcomed by campaigners who have repeatedly called on ministers to insulate Britain’s leaky housing stock. But many say the extra £6bn is not enough and that the 2025 start date is too late.

Earlier this year a report by the government’s own advisers, the climate change committee, described “a shocking gap” in policy for better-insulated homes. It pointed to the fact that the government promised significant public spending in 2019 and committed to new policies last year, but that neither had yet materialised.

Brazil's president-elect Lula da Silva arrives at Cop27

“Today’s announcement of a new taskforce and demand reduction target gives industry certainty and shows the government is getting serious about making energy efficiency a national priority,” said Juliet Phillips, senior policy adviser at independent climate change think tank E3G. “But what is missing is a ramp up of funding now to insulate more homes in the next two years as energy bills go through the roof.”

Mr Hunt told MPs on Thursday that the government was already planning to invest £6.6bn in this parliament in energy efficiency. Energy efficiency was crucial to shielding Britain from international gas prices, he added.

He told the nation that by 2030 the government aims to cut energy consumption from buildings and industry by 15 per cent, saving £28bn from our national energy bill or £450 off average household bills at today’s prices.

A green light for Sizewell C

Next up was the decision to greenlight the building of a new nuclear power plant at Sizewell C in Suffolk.

Some campaigners welcome investment in nuclear fuel as a necessary alternative to pumping out greenhouse gas emissions into the atmosphere and warming the planet.

While others feel nuclear energy has no place in a green future.

A spokesperson for the Wildlife Trusts said Sizewell C would “destroy” vast swathes of the Suffolk coastline, leading to the loss of crucial natural habitat and endangered wildlife.

“Successive governments have focused on nuclear power instead of scaling-up home insulation, energy efficiency, and smart storage technologies,” the spokesperson said.

Road tax for electric cars

From April 2025 electric vehicles will no longer be exempt from road tax, Mr Hunt also announced on Thursday.

That’s because the Office for Budget Responsibility forecasts that half of all new vehicles will be electric by 2025.

Sam Hall, the director of the Conservative Environment Network, said tax rises for electric vehicles were “inevitable” as battery technology becomes cheaper and more popular with motorists.

“The government must maintain momentum behind the transition by confirming the zero-emission vehicle mandate, requiring the private sector to deliver affordable electric cars to the market,” he said.

Foreign Aid

Lastly, Mr Hunt announced that it would not be possible to restore Britain’s foreign aid budget back to 0.7 per cent of GDP.

The government’s top climate adviser recently told The Independent that the government’s decision to renege on its commitment to spend 0.7 per cent of GDP on overseas development aid risked undermining Britain’s climate leadership on the “biggest issue” at Cop27.

That is: how to provide resources to help developing countries make progress without harming the planet.

Lord Deben said countries will find it hard to believe Britain will deliver on its pledges, which will in turn make it harder for the UK to persuade others to act.

The Independent has contacted the government for comment.

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