Chancellor, Rt Hon John Healey MP, has today unveiled the first Budget of the Andy Burnham Government, and Energy featured strongly.
Gas Standing Charge Abolished
In a win for the energy efficient gas consumer, the standing charge on gas has been removed. This does not mean consumers will notice an immediate saving as the cost will be added to the usage fee. Consequentially people that use more gas will pay more, while those who are more energy efficient will benefit.
(Ofgem and DESNZ have been asked to look at ways to remove standing charges from electricity in the future as this is not currently feasible)
The Warm Homes Plan to be cut by £1Billion
The Budget for the Warm Homes Plan has been reduced by £1 Billion. The budget document claims that this money is to go to the Defence Budget, but that may only be part of the picture. DESNZ has seen its departmental budget reduced significantly to pay for the Household Energy Payment
£100 to Every A-D Council Tax Household
The Chancellor made the announcement of a £100 Household Energy Payment to every household in council tax Bands A to D. This means 20million households will receive a cash payment into their bank account in January. DESNZ has had to find the £2.6billion to deliver this from their Departmental Budget, and the bulk of it has come from reducing the planned future spending on the Warm Homes Plan.
Boiler Upgrade Scheme funding frozen
The Boiler Upgrade Scheme (BUS) was integrated earlier this year into the Warm Homes Plan, and to pay for the cuts to the Warm Homes Plan, BUS has borne the brunt of the cuts. Installers should not see any immediate impact as there has not been any major overspend on the £400m Scheme this year, however the budget for the next 3 years will remain at £400m rather than raise to £600m in 2027/28, £683 in 2028/29 and up to £709m in the 2029/30 financial year. This equates to a £792m cut between this April and March 2030, or a reduction of 88,000 air source heat pump installations.
Gas Shipper Obligation and other Levies to be Scrapped
The Government had previously announced that it would fund Hydrogen based energy projects through a new levy called the Gas Shippers Obligation, but this will now not be put in place and the funding will instead come from general taxation. All other existing and planned Green Levy schemes will also be transferred to general taxation.
3% Increase in Tax on Banks
To pay for some of the costs now being moved to general taxation the Government will double the surcharge tax on Banks from 3% to 6% for 2027/28 tax year.
Zero rate VAT on domestic electricity extended
The reduced VAT rate for domestic electricity, which cut it from 5% to 0% back in April been extended by three months until the end of June 2027.
However, the 0% VAT tax relief window for clean energy installations will not be extended beyond March, but will return to 5% in April.
Wholesale Contract for Difference (WCfD)
Mr Healey announced plans to transition older, legacy renewable energy projects (mostly solar or wind) onto fixed-price contracts to break the link between international gas spikes and electricity bills.To achieve this, the government has officially launched a consultation on a new mechanism called the Wholesale Contract for Difference (WCfD).
Restrictions on New Clean Energy Projects
The Government will only approve and buy into new clean energy projects if they directly lower consumer bills, benefit the overall energy system, and have an immediate, viable grid connection ready via the new GB Grid subsidiary of GB Energy.
There will be an exception for Data Centres that wish to install generation for their own needs prior to having a viable grid connection.
British Industrial Competitiveness Scheme (BICS)
The Government is introducing a new British Industrial Competitiveness Scheme (BICS) to cut electricity bills by up to 25% for approximately 10,000 eligible manufacturing firms. To be eligible the business must be manufacturing products, within one of the 8 core "frontier" growth sectors of the Industrial Strategy, or belong to a qualifying foundational manufacturing industry that directly feeds into those frontier supply chains, and the manufacturing site must consume at least 33 MWh of grid-supplied electricity annually. While the scheme starts in April 2027, eligible companies can also make back-dated cash back claims for usage from April 2026.
Other measures that will affect our industry
The Chancellor also outlined some changes that will affect small and medium sized businesses.
- Minimum wage will increase in April by 3.9% (~50p an hour)
- Self Employed people will now be eligible for Paid Paternity Leave
- Threshold for Small Business Rate Relief for Retail, Hospitality, and Leisure properties to be raised from £12,000 to £18,000
- HMRC to be better funded for Tax Collection
- From 2029 Income Tax Self Assessment will be payable in smaller regular payments by monthly direct payments rather than annually.
- Threshold for income tax on casual income from small-scale trading, or miscellaneous self-employment has been raised from £1,000 to £3,000
- Income Tax on property (Landlord Tax) and savings will increase by 2%
- £5 billion in support for start-up businesses
- Founders Relief, a new lower 10% Capital Gains Tax (CGT) rate on up to £10 million of lifetime gains for founders of businesses who hold a 25% stake when trading began, meet a 5-year holding period, and have a company with at least £10 million in turnover, employ 15 full-time staff, or show significant R&D
- Incentives to promote Investment in UK companies and shares