How much you pay for electricity and gas is set to fall, but not without significant cuts to schemes designed to introduce long-term efficiency for households. Meanwhile, plug-in drivers will no longer get a ‘free ride’.
Although the focus was on cost of living and bringing down the national debt, yesterday’s budget announcement did include some significant climate-related policies.
Domestic energy bills, for example, are set to fall by an average of £134 per year by shifting a proportion of renewable electricity subsidies from bills to taxation systems. Although this has been broadly welcomed, along with the decision to maintain the windfall tax on major oil and gas giants, Labour’s move to cut the Energy Company Obligation (ECO) has drawn criticism from some.
Earlier this year, Environment Journal reported on how ECO4 – the current iteration of a scheme asking energy suppliers to pay for efficiency measures in fuel poor homes – suffered from poor regulation, leading inadequate, impractical and in many cases bodged insulation installations. It’s also true that since 2013, when ECO replaced two similar initiatives, CERT and CESP, the number of households targeted for this type of support has dropped. But many believe reform rather than removal is the best way to go.
However, it’s worth noting the budget has allocated £1.5billion to continue working towards improving energy efficiency in vulnerable households. This is less than the outbound scheme cost, and it’s not clear how it will be delivered. Nevertheless, a more localised approach takes responsibility for on-the-ground work away from suppliers – and unscrupulous contractors – may well lead to a cost effective and successful rollout.
At the other end of the energy market, £14.5million will be made available to a new-low cost industrial centre at Grangemouth in Scotland, where the decline in oil and gas jobs is being felt particularly hard. A site in Cornwall will also receive support for ‘critical minerals, renewable energy and marine innovation’.
Elsewhere, fuel duty on petrol and diesel has been frozen – with a plan to reverse previous cuts led by the Conservatives at a later date, making it clear Labour is still committed to moving Britain to plug-in transport modes. That said, Reeves also announced a new electric vehicle excise duty.
This will go some way to replacing revenue lost from traditional carbon-based fuel tax systems, priced at 3p per mile for full-electric and 1.5p per mile for hybrid vehicles. The average driver of a 100% plug-in will therefore pay around £240 annually, roughly 50% of the traditional fuel duty, meaning EVs will still be cheaper to run than petrol or diesel.
Any increase in costs could impact the already underperforming EV market, of course. According to the Office for Budget Responsibility, there may be 440,000 fewer electric car sales than previous estimates as a result of this new tax. Balancing this, support for manufacturers and buyers will increase, potentially offsetting some of that decline and saving 130,000 vehicle purchases.
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