The Chancellor exceeded expectations of a light budget for the sector by omitting any reference to energy in his speech; however, in one of the more significant announcements in recent years, the document itself contained news that the Treasury is to replace the Levy Control Framework with a new set of controls to be set out later this year. Green businesses will be relieved that the Government also reaffirmed its commitment to carbon pricing, with details on prices for the 2020s due in the Autumn Statement.
Overview
In a Budget that had been expected to be very light on energy policy, the Chancellor nevertheless exceeded expectations by omitting any reference to energy in his speech. This was not entirely surprising given the large scope of work BEIS is currently undertaking on the Emissions Reduction Plan (or Clean Growth Plan as it is now understood to be called) and the Industrial Strategy – including a full review of the costs of decarbonisation. The Chancellor has taken full advantage of the opportunity to defer decisions until those areas have been developed.
However, lurking in the Budget document was one of the more significant developments in energy policy in recent years with the announcement that the Levy Control Framework will be replaced from 2020/21. While this will not have come as a shock to industry, having been precipitated by criticism of the Framework from a plethora of stakeholders including the National Audit Office and Public Accounts Committee, and heavily ‘workshopped’ by Treasury, we will have to wait until later this year to hear further details of its replacement. This will, however, give industry a chance to influence what it will look like.
There was some comfort for green business in news that the Carbon Price Floor is to be retained, but on the whole green groups have expressed disappointment at the absence of meaningful measures to address concerns, including on the hikes in business rates for solar and clarity on a route to market for lowest cost renewables.
On retail, mentions of energy were again notable by their absence in the Budget’s reference to the Consumers and Markets green paper, in spite of rising political and media pressure on the issue of energy prices. With the Bill predicted by some to be the last opportunity for retail energy policy measures to come forward before the Government becomes engulfed in Brexit, those in the industry who would like to see meaningful change will need to make a strong case over the coming weeks – particularly as many trailed areas of retail energy policy have reportedly been deemed too controversial for inclusion.
Policy announcements - Levy Control Framework
LCF to be replaced
The Government announced that the existing LCF will be replaced by a new set of controls which will be set out later this year. The Government has been holding workshops with industry exploring these options.
Policy announcements - Carbon Pricing
2020s carbon pricing to be announced at a later date
The Government outlined that it will set out further details on carbon prices for the 2020s in the Autumn Budget 2017.
Starting in 2021-22, the Government will target a total carbon price and set the specific tax rate at a later date. This will aim at giving businesses greater clarity on the total price they will pay.
Policy announcements - North Sea Oil and Gas support
Transfer of late life assets
The Government said it had listened to the North Sea Oil and Gas industry and the Scottish Government regarding the transfer of late life assets in the industry to maximise the exploitation of remaining North Sea Oil.
It announced that it will publish a formal discussion paper alongside the Finance Bill on the case for allowing transfers of tax history between buyers and sellers.
The Government will also establish a new advisory panel of industry experts to ensure appropriate scrutiny of the options proposed. The review will report at Autumn Budget 2017.
Policy announcements - Consumer protection
Consumers and Markets green paper
A likely evolution of the previously announced Better Markets Bill, the Government outlined that it will be releasing a green paper that will seek to ensure that competition and markets can work effectively to deliver lower prices and more choice.
As part of this, the Government will; legislate to allow consumer enforcement bodies to ask the courts to order civil fines against companies that break consumer law; develop proposals to protect consumers from facing unexpected payments when a subscription is renewed or when a free trial ends; consider how to simplify terms and conditions.
The proposed green paper did not make explicit mention of the energy market.
Policy announcements - Co-operatives
Increase in audit threshold
In a move that could have a beneficial impact on co-operative energy schemes, the Government will increase the turnover threshold for which co-operatives are required to conduct a full audit from £5.6million to £10.2million, and the assets threshold from £2.8million to £5.1million.
Policy announcements -Training
Pilot scheme for life-long learning
The Government announced a new £40million pilot scheme to test the effectiveness of different approaches to life-long learning with the suggestion that the changing nature of the economy and emerging industries will mean that people have to re-train throughout their career.
Policy announcements - Electric Vehicles
Reaffirmation of commitment to electric vehicle development
The Government reiterated its commitment to developing batteries for electric vehicles by outlining that the Industrial Strategy Challenge Fund (which has an overall budget £270 million) will fund research into electric vehicle battery development, design and manufacture.
Policy announcements - Air Quality
Consultation on air quality
A consultation by Government will take place in the spring on a detailed draft plan on how the UK’s air quality goals will be achieved.
