The Spring Budget provided scant support on energy efficiency, another freeze on fuel duty and very little on the subject of net zero, but there were a few positives hidden away in the red briefcase.
The Budget was criticised as a missed opportunity for accelerating the UK’s transition to a greener economy. The big ticket item was £20 billion in new funding for nascent carbon capture, usage and storage (CCUS) technology – an area at the heart of the government’s latest Net Zero Strategy – but it will provide little benefit in the here-and-now.
Of more immediate interest to businesses will be changes to the capital allowance system. From 1 April, businesses will be able to make use of Full Expensing (FE) until at least 2026 on main rate assets. This allows the full cost of qualifying plant and machinery investments to be deducted from profits in the first year, rather than more slowly over the life of the asset.
For longer-life ‘special rate’ assets – which includes green technologies such as solar panels and thermal insulation in buildings – the existing 50 per cent First Year Allowance (FYA) scheme will continue for a further three years, rather than end on 31 March 2023 as planned. This allows half the costs of qualifying investments to be deducted from profits in the first year, providing much faster tax relief than under the default Writing Down Allowances (WDA) regime.
The government has also published a call for evidence on options to reform VAT relief on the installation on energy saving materials in households. Currently, the installation of some energy saving items such as insulation, central heating controls, solar panels and heat pumps are zero-rated for VAT. The government is now considering the inclusion of more technologies, such as battery storage.
Over £60 million of support is set to be provided to public swimming pools across England, some of which will be targeted at energy efficiency measures to reduce operating costs. The Chancellor also announced over £100 million of support for charities and community organisations, again some of which will be aimed at improving energy efficiency in buildings.
CCAs, a little known scheme outside of certain energy-intensive sectors, will now be extended for a further 2 years rather than being mothballed as planned.
CCAs incentivise eligible companies to save energy by providing a discount on the Climate Change Levy (CCL) paid through business energy bills, in return for meeting energy efficiency targets. The scheme should be of particular interest to larger energy users, especially those in manufacturing industries.
Finally, the government’s aim to extend devolution of powers and funding to city regions across England could be good news for the green economy.
The Budget announced two new trailblazing devolution deals with Greater Manchester and the West Midlands Combined Authorities, which will equip them with more powers to deliver on local priorities – including net zero.
Included in the deals is a commitment to multi-year devolved funding settlements, giving the city regions the flexibility and independence to allocate funding as they see fit in areas such as retrofitting buildings. Given that many city regions have stronger climate commitments than those made at the national level, this could be a big win for local green economies.
21 November 2024
19 November 2024
Green Economy
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