The 2024 Spring Budget looks set to be a crucial one, setting out the government’s spending plans ahead of the General Election later this year.
It comes after another challenging year for businesses, who have had to negotiate rising inflation, increased costs and the ongoing impact of the volatility in the wholesale energy markets.
What has become clear is that, in unpredictable times, it can be tricky to confidently plan ahead. For example, the recent announcement from the Labour Party that it would no longer be able to commit £28 billion a year to green projects - something that it included in its 2021 spending plan - highlights the problem of making big promises ahead of a period of unforeseen financial instability.
Labour, does of course, blame the disastrous ‘mini Budget’ announced in September 2022 by then Prime Minister, Liz Truss and former Chancellor Kwasi Kwarteng, for needing to revise its plans. That saw the ambitious ‘Growth Plan’ having to be significantly rolled back when it became clear that it wasn’t based on sound financial ground.
So, this begs the question - are spending promises set in stone or are they just there to be broken?
Ahead of the Chancellor’s 2024 speech, we have taken a look back at some of the main announcements for business energy users from the 2023 Budget, and whether the pledges made then have come to fruition.
The start of the Energy Bills Discount Scheme
In 2023, while the Chancellor announced a three month extension to the Energy Price Guarantee for households, a similar provision was not announced for businesses. The Energy Bill Relief Scheme (EBRS) was replaced by the Energy Bills Discount Scheme (EBDS) on 1 April 2023, which resulted in much lower levels of government support for the majority of businesses. The EBDS is currently due to end on 31 March 2024, and it looks like that there will be no plans to extend this further.
£20 billion funding for CCUS
In the 2023 Budget, up to £20 billion was announced to support the early deployment of carbon capture utilisation and storage (CCUS) projects. At the end of December, the Department for Energy Security and Net Zero (DESNZ) published ‘CCUS Vision’ its plans for new competitive market in CCUS by 2035, outlining how it will spend this investment.
Replacement for the ‘super-deduction’ tax scheme
Last year, the Chancellor confirmed the removal of the super-deduction capital allowance, and announced a temporary replacement - 'full expensing'. It was further confirmed in the 2023 Autumn Statement that full expensing would be made permanent, which will help some businesses to make the necessary plant and machinery investments for a more sustainable future.
Lack of further energy efficiency incentives
That said, it is also important to note what wasn’t included. In the 2022 Autumn Statement, the Chancellor announced a £6 billion pot for energy efficiency, which he then alluded to in the 2023 Budget. DESNZ outlined how it plans to allocate this pot - which isn’t due to become available until 2025 - at the end of last year. For businesses and public sector organisations, this included £225 million for the Industrial Energy Transformation Fund (IETF) - £185 million of which was announced as the proposed Phase 3 in November 2023 - and £1.25 billion allocated to the Public Sector Decarbonisation Scheme (PSDS). It also said there would be £410 million for ‘Industrial Energy Efficiency and decarbonisation’, with the government saying that ‘further details will be announced in due course’.
However, the Energy Efficiency Taskforce, which was established in March 2023 to “support a step change in the reduction of energy demand through accelerated delivery of energy efficiency across the economy.” was disbanded in September 2023 after only meeting four times. This came after the Prime Minister announced roll backs to some of the government’s net zero policies.
A General Election-themed Budget
So, what can we expect in this year’s Budget? Some commentators have noted that pre-Election Budgets tend to bring out the generous side in Chancellors, keen to entice potential voters. Will we see further tax incentives to help businesses to invest? A spending plan equivalent to the Inflation Reduction Act in the US or the Green Industrial Plan in the EU? Or will it simply reaffirm what we already know?
For a more in-dept review, you watch our Energy Insight webinar that took place on Thursday 14 March at 1:30pm where I explored the main talking points, what these mean for businesses, and if further support is needed.