Does the Spring Statement Pour Cold Water over COP26 ambitions?

29th March 2022, 1:47 pm

Dale Edwards, a strategic consultant in Green Energy with national law firm Clarke Willmott LLP shares his thoughts following the Spring Statement relating to the ambitious plans to achieve net zero.

The background to the Spring Statement was always going to be focused on the rising cost of fuel, energy and food prices. With the news that inflation had risen to a 30 year high at 6.2% being announced just before the Spring Statement all eyes were focused on how the Chancellor was going to react to these challenges not just in the short term but with an eye on the future.

One of the headline announcements was the reduction by 5p on the duty on petrol and diesel for a period of 12 months, a giveaway of approaching £2.4bn according to the Treasury. This was welcomed particularly by those car and van drivers who need to fill their tank every week, who are likely to benefit by around £150 over the next year. However, for the vast majority of vehicle users it will have minimal impact, compared to significant rises in domestic and commercial heating.

In my view this was a missed opportunity. The £2.4bn could have been invested in the acceleration of electric charging points, additional funding to support electric vehicle and bike community schemes and grants to those organisations who provide transport for those in need. Not only would this support environmental behavioural change but also could be targeted to those who need support the most.

It was pleasing to see that VAT on energy-saving products which had benefited from a reduced VAT rate of 5%, will now treated as 0% VAT. The number of items that qualify for the relief is also being widened but will need to wait for further guidance to understand if items like batteries for energy storage are now included. This is good news for homeowners who want to install solar panels, heat pumps and other energy saving solutions. The challenge still remains that the upfront cost of these products is relatively high and with supply chain prices rising, the impact of the 0% VAT announcement is likely to be tempered.

One item which nearly went unnoticed was the introduction of business rate exemptions for machinery used in onsite renewable energy generation and storage. This has been brought forward by a year and will be effective from April 2022 and includes 100% relief for eligible low-carbon heat networks with their own rates bill.

It was surprising that the Government did not consider some sort of windfall tax on fossil fuel companies, which appears to be gaining political momentum across all parties. Whilst I appreciate many of these companies are diversifying into clean green solutions requiring significant investment there is an argument that even a one off £1bn raised could have been used to help alleviate fuel poverty and been added to the Household Fuel Support Fund which did receive an additional £500m or extend the Warm Home Discount scheme.

Overall, the Spring Statement is a nudge in the right direction to reduce carbon emissions rather than a step change which is required to achieve the challenging targets which have been set. Whilst there is significant political and economic uncertainty due to many factors including the war in the Ukraine it lacked ambition or innovative solutions to address rising costs and the environment.

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton.

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