A look back at the “not-so-green” Budget, from John Barwise.
George Osborne, Chancellor of the Exchequer, was on his feet for over an hour, delivering a Budget speech for “the makers, the doers and the savers” that are helping the UK out of recession. Not a word about climate change, which the Prime Minister said was “one of the most serious threats that this country and world faces”. And barely a nod to the “the makers, the doers and the savers” of renewables and energy efficiency, which must underpin future economic growth in a low-carbon world.
For green businesses and those environmental foot soldiers doing their bit to protect the planet and keep the lights on, this was a disappointing Budget. The £7 billion energy package announced by the Chancellor will be a welcome boost to manufacturing, saving a medium-sized company around £50,000 a year on energy costs, but it will do little to incentivise those businesses to cut their energy bills and reduce carbon emissions through energy efficiency measures.
The £7 billion package will be particularly welcomed by energy-intensive industries such as steel makers, chemical plants and paper mills who will benefit from an additional £1 billion extended compensation scheme to protect them from rising energy bills. The costs will be paid out of the Renewable Obligation and green levies — money the renewables industry says should be used to promote energy efficiency and renewable, rather than compensating businesses that continue to generate the bulk of UK emissions.
Capping the carbon price floor (CPF) at £18 per tonne to 2020 will also be welcomed by some businesses — under the current tax levy energy suppliers would be paying £30 per tonne by 2020. The coal industry, arguably the biggest greenhouse gas emitter, is likely to benefit most. This is a big turn around since the Chancellor himself launched the CPF three years ago, arguing that, “Investment in green energy will never be certain unless we bring some stability to the price of carbon.” It will also undermine investment in clean energy and make the task of keeping to our legally-binding carbon reduction programme that much harder.
How times change policies. The chancellor’s generous tax incentives to North Sea oil industries in recent years will be further enhanced with additional tax allowances, which will wring "every drop of oil we can" from the North Sea”. That’s got to be good for the motorist, who will also benefit from a further freeze on fuel duty, but this could push up demand at a time when supply is dwindling. It seems the Chancellor has forgotten about one of the first laws of good economics — the law of diminishing returns. We have already passed peak oil in the UK and wringing every last drop is something the oil industry will not be doing because it will cost too much, even with the tax breaks.
To be fair, George Osborne doesn’t have much room for manoeuvre and growing the economy, particularly when manufacturing and export is his priority. Even the greenest businesses in the UK will welcome that. And there were a few green shoots in the spring Budget. He has promised to retain a discount on low-emission company cars, which should help bolster the green fleet car market. To keep the greens quiet, combined heat and power plants (CHP) will in future be exempt from the CPF, which should bring some stability to an industry that is beginning to find its feet again. Other than that there is little on offer for renewables or energy efficiency to incentivise businesses to go green. Once again, the market will get jittery over the Government’s mixed green message, which could undermine one of the fastest growing industries in the UK economy.
But let’s not ignore some of the real Budget benefits. A penny off a pint means you get one pint free for every 300 you buy. As for the benefits to gamblers, it’s more likely to be the big energy companies that will be shouting “Bingo!” For those approaching retirement, the options have never been better, but it is unlikely the “greens” will be taking an early pension just yet.
Last reviewed 24 March 2014