Post: Reeves delivers Spring Statement

Rachel Reeves delivers Spring Statement

On 26 March, Chancellor Rachel Reeves delivered her second fiscal statement.

In the speech to Parliament Reeves noted that the government’s task is to “secure Britain’s future in a world that is changing before our eyes”. The global economy “has become more uncertain” and that borrowing costs are on the rise “for many major economies”, Reeves added.

One of the key developments affecting the UK economy was noted as volatile global oil prices, which have fed into higher fuel prices, while higher market prices for gas and electricity will contribute to higher consumer prices.

For the energy sector, the Spring Statement committed to removing Climate Change Levy (CCL) costs from electricity used in electrolysis to produce hydrogen. This will support the growth of low carbon electrolytic hydrogen production, which will play an important role in decarbonising the power system and hard to electrify industrial and transport sectors. A consultation was launched to determine the best legislative route to remove these costs and ensure the commitment is delivered in a way that achieves government’s objectives whilst avoiding unintended consequences. 

The statement also noted that the Planning and Infrastructure Bill will streamline planning processes and unlock a new scale of housing and critical infrastructure delivery by delivering a faster and more certain consenting process for critical infrastructure. This will help to deliver the scale of change needed to tackle the housing crisis, reduce energy bills and commuting times by fast-tracking critical infrastructure, creating a more appealing environment for businesses to invest.

While this statement was light on measures impacting the energy sector, the 2024 Autumn Budget contained a number of measures for the industry including:

• Launching the National Wealth Fund, the UK’s new impact investor, which will mobilise over £70B of private investment in the UK’s clean energy and growth industries.
• Confirming £125M for Great British Energy, which will be headquartered in Aberdeen.
• Government support for two electrolytic hydrogen projects.
• Providing £3.9B of funding in 2025-26 for Carbon Capture, Usage and Storage Track-1 projects.
• Delivering hundreds of local energy schemes to help decarbonise the public estate through the Public Sector Decarbonisation Scheme, with over £1B of funding over three years.
• £163M to continue the Industrial Energy Transformation Fund from 2025-26 to 2027-28.
• Maintaining tax incentives to purchase electric cars through Vehicle Excise Duty First Year Rates and the Company Car Tax regimes, as well as by extending 100% First Year Allowances for electric cars and charge points for a further year.
• Over £200M in 2025-26 to accelerate EV charge point rollout, including funding to support local authorities to install on-street charge points across England.
• £120M in 2025-26 to support the purchase of new electric vans via the plug-in vehicle grant and to support the manufacture of wheelchair accessible EVs.
• £134M to support the delivery of port infrastructure to facilitate floating offshore wind.
• Continued support for Energy Intensive Industries through around £350M of funding across 2024-25 and 2025-26 to support energy efficiency, decarbonisation, and technological innovation.
• £163M to continue the Industrial Energy Transformation Fund from 2025-26 to 2027-28.
• The main rates of the Climate Change Levy (CCL) for gas, electricity, and solid fuels will be uprated in line with Retail Price Index (RPI) in 2026-27. The main rate for liquefied petroleum gas will continue to be frozen. The reduced rates of CCL will remain at an unchanged fixed percentage of the main rates.
• The government will maintain Carbon Price Support rates in Great Britain at a level equivalent to £18 per tonne of CO2 in 2026-27.
• A UK carbon border adjustment mechanism (CBAM) will be introduced on 1 January 2027, placing a carbon price on goods that are at risk of carbon leakage imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron and steel sectors.
• From 1 November 2024, the Energy Profits Levy (EPL) rate will rise by 3 percentage points to 38%, the investment allowance will be abolished, and the rate of the decarbonisation allowance will be set at 66%. To provide certainty and to support a stable energy transition, the government will make no additional changes to tax relief available within EPL, which will end on 31 March 2030. The government will publish a consultation in early 2025 on how the taxation of oil and gas profits will respond to price shocks after the EPL ends.
• Support in 2025-26 for UK fusion energy research and £2.7B of funding to continue Sizewell C’s development through 2025-26. The equity and debt raise process for this project will conclude in the spring and a Final Investment Decision will be taken at Phase 2 of the Spending Review. Great British Nuclear’s Small Modular Reactor competition is ongoing and final decisions will be taken in the spring.