Expectations for the UK Autumn Budget

The Office for Budget Responsibility has underscored the important role of measures to permanently reduce household energy demand (and bills) to support fiscal stability. These include energy efficiency and a shift away from fossil heating systems, and towards clean heat systems like heat pumps.

The government has recently taken steps to boost heat pump deployment, including a welcome uplift to the Boiler Upgrade Scheme, increasing the grant from £5,000 to £7,500. This has already led to a significant increase in consumer interest. However, other changes are damaging – including pledging to “never” increase minimum energy efficiency standards in the private sector. This could cost renters £8bn in energy costs over the next decade.

Action is needed to address this policy gap, providing long-term certainty and incentives to spur action, while ensuring affordability for all.

 E3G recommendations

• Incentives to spur investment: Introduce landlord tax incentives for efficiency measures, allowing improvements to be offset against income tax to make investment more attractive and save renters money. Introduce an Energy Saving Stamp Duty to spur investment in energy efficiency at the point of purchase of a property, a key time when people consider retrofit.  
• Provide long-term certainty by setting out how the £6bn committed for 2025-28 will be spent, with a focus on ensuring the deliverability of retrofit schemes.
  
• Reducing heat pump running costs: Energy bill levies are disproportionately placed on electricity bills, which increases the running costs. E3G is calling for a targeted exemption of levy payments for electric heating users to remove the “heat pump tax”.   

While historically, the UK has done well on deployment of offshore wind, we risk losing our leadership position – and missing out on financing opportunities – without further interventions. Notably, the last Contracts for Difference (CfD) auction secured just 3.7 gigawatts of new renewable capacity – a third of the total last year – and failed to contract any new offshore wind. In a welcome move, the government has announced an uplift to the strike price.

There is an urgent need to update the UK’s old and creaky electricity grid, making it fit-for-purpose and ready for new domestic renewables generation; as well as for increasing demand for electric vehicles and electric heating. The government has welcomed a recent report from Nick Winser, the UK’s Electricity Networks Commissioner, and will consider the recommendations before presenting an action plan to boost capacity and speed this autumn.

E3G recommendations

• Provide additional support for UK renewables. Ensure the success of the next Contracts for Difference auction round in Spring, boosting the strike price and overall size of the pot, and consider other policies to make the UK an attractive investment environment. 
• Remove blockers to renewables. Use the Autumn Statement to set out the government’s response to Nick Winser’s report, taking forward recommendations to boost grid capacity and connections.  

Treasury is considering introducing a carbon border adjustment mechanism (CBAM). This is a tax on certain imports like steel and cement that produce a large volume of carbon emissions when they are produced. In a recent E3G study, we found that three-quarters of UK manufacturers (73%) support the UK introducing a CBAM, with fewer than one in ten (8%) opposing it.

Meanwhile, there is pressure on the government to decide to withdraw from the Energy Charter Treaty (ECT) ahead of its own deadline of the end of November. The Energy Charter Treaty remains a tall barrier to climate action. E3G has explored what is needed for the ECT to be aligned with the Paris Agreement and why the reform still falls short. 

E3G recommendations 

• The UK must ensure an orderly withdrawal process from the Energy Charter Treaty and step up its diplomatic coordination with like-minded partner countries.
• The UK should introduce a CBAM – but this can only come in conjunction with increasing the ambition of the UK ETS: in particular, phasing out the free allocation of credits under the ETS as a CBAM is phased-in.  

Attracting investment into the UK’s net zero transition is essential if the UK is to transform its economy into a growth engine. However, following the Prime-Minister’s net zero row-backs this October, investor and private sector confidence is bruised. Ford’s critical response to the Prime Minister highlighted that business requires “ambition, commitment and consistency”, all of which have been undermined.

Beating the competition requires the UK to build trust – and set out a long-term, credible and coherent policy and regulatory environment. Leading UK private sector institutions, representing over £10 trillion AUM, have called on Government to provide them with the confidence they need to invest, through delivering a Net Zero Investment Plan. Government must capitalise on this eagerness to support the net zero transition and answer their calls. 

E3G recommendations

Announce a UK Net Zero Investment Plan. This includes committing to clear sectoral investment roadmaps, and empowering an independent institution to track green financial flows across the UK. E3G and WWF have set out the key elements needed to build on the 2023 Green Finance Strategy and ensure that the UK becomes a world-class destination for green investment.