This Autumn Budget marks the first fiscal event of the new Government, providing a critical opportunity to build a strong foundation for economic growth, place the UK back at the front of the global race of low-carbon investment, and deliver more secure, cleaner energy for households and businesses.
Energy UK welcomes the Government’s focus on the energy sector as a key driver of economic growth which will ultimately have a significant benefit on households. As a sector, we’re determined to work in partnership with the Government and deliver the majority of capital needed to realise its energy targets.
Around two-thirds of the finance needed for the energy transition will come from the private sector, and recent examples show how public finance can boost private investment. The previously Government-owned Green Investment Bank, for instance, mobilised more than £3 for every £1 of Government spending.[1]
Indeed, Oxford Economics analysis for Energy UK suggests that a more ambitious pathway to Net Zero compared to current policies could result in an economy 6.4% (£240 billion) larger by 2050, the equivalent size of the manufacturing sector in 2022.[2]
The future energy system under an ambitious pathway will also deliver financial benefits through more secure prices or innovative products, and a system that cuts costs and carbon.
HM Treasury should be at the very centre of the energy transition to ensure that in the face of rising competition, the UK is one of the easiest places in the world to invest in low-carbon infrastructure. Major investment will likely take time to filter into economic growth, which means this first Budget should be ambitious.
We believe this first Budget should focus on the supply-side reforms around three key themes:
- Power economic growth through the Clean Energy Superpower mission
- Unblock the blockers: planning, network connections, supply chain and skills
- Deliver warmer homes and a smarter energy system
Energy is a fundamental input cost to the entire economy and in recent years has been one of the main drivers of inflation. At the peak of the crisis in winter 2022/23, inflation was over 10% with a third of the increase in prices directly attributable to rising energy costs. Up to another 45% of the rise in prices occurred through energy costs feeding through into the costs of energy-intensive products.[3]
From heavy manufacturing to the price of food on supermarket shelves, there are few industries or households that have not been affected by the volatility of global gas markets. This impacts everything from UK competitiveness globally to the ability of households to pay for basic goods. Warm homes and stable energy prices also have a huge impact on public services, including savings for the NHS.[4]
Since 2022, the Government has provided over £40 billion (though this figure is likely to be significantly higher) of financial support directly to energy bills, due in most part to the high and unpredictable prices of international gas imports for power and heating.[5] HM Treasury should use the recent, and to some extent ongoing, energy crisis to ensure that the UK can be as self-sufficient as possible when it comes to its energy sources.
While the worst of the energy crisis in the wholesale markets is over, millions of customers still struggle to pay their bills. Household energy debt is already standing at well over £3 billion, a record high and unsustainable for the industry to carry. Debt is likely to have already increased the summer and preliminary analysis by Energy UK shows by the end of next winter this could be as high as around £4 billion if trends continue.
Direct Debit failures for energy bills are also at least three times what they were pre-crisis. The energy price cap from 1 October will increase by 10% to the equivalent of £1,717 per year for a typical household, leading to further pressures over the winter months. Ambitious policies now will deliver economic growth, and Energy UK looks forward to working with HM Treasury on its mission.
[1] Department for Business and Innovation (2015), Green Investment Bank Policy Statement
[2] Energy UK (2023), The Clean Growth Gap
[3] Office for National Statistics (2023), The energy intensity of the Consumer Prices Index: 2022
[4] The Lancet (2023), Impact on mortality of pathways to Net Zero
[5] Office for Budget Responsibility (2023), The cost of the Government’s energy support policies
Downloads
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Energy UK Autumn Budget Submission 2024
Type: PDF (540 KB)
