Energy policy after the Ukraine war. Last week the Government released its plan to generate ‘secure, clean and affordable British energy for the long term’ following the rise in oil and gas prices and Russia’s invasion of Ukraine. The strategy included ambitious targets for offshore wind, the expansion of nuclear power and new North Sea oil and gas projects, but was widely criticised for doing too little to bring down energy bills or rapidly reduce reliance on Russian fossil fuels. Carbon Brief analysed the implications for climate change, while EDIE rounded up the reactions. BusinessGreen’s James Murray argued that ‘it is hard to discern anything here that moves beyond filling in some of the policy gaps that should really have been plugged in the Net Zero Strategy last year.’
Nuclear ambitions. The energy security strategy aims for nuclear power to generate 25% of the UK’s projected electricity demand by 2050 (up from around 16% now), proposing that up to eight new nuclear reactors should be built by 2030.
North Sea oil and gas and fracking. The energy security strategy seeks to expand production of oil and gas in the North Sea, with the newly-renamed ‘North Sea Transition Authority’ launching another licensing round in the autumn and new ‘Gas and Oil New Project Regulatory Accelerators’ being set up to facilitate the rapid development of projects. An ‘impartial technical review’ on fracking for shale gas will be conducted by the British Geological Society.
Wind power. The energy security strategy announced a target of 50 gigawatts of offshore wind power generation by 2030, up from a previous goal of 40GW, and about 14 GW at present. The government aims to cut the consent approval process from four years to one. This was widely welcomed. But on onshore wind, the cheapest form of power and the fastest to deploy, it left in place the restrictive rules introduced in 2015 which make it extremely hard to obtain planning permission for onshore wind turbines. The strategy only promises to ‘consult on developing local partnerships for a limited number of supportive communities in England who wish to host new onshore wind infrastructure in return for guaranteed lower energy bills.’
Energy efficiency: the missing piece. The absence of significant new measures to support home insulation and other energy efficiency and demand reduction measures - the cheapest method of reducing energy bills and emissions - drew the strongest criticism of the strategy. UCL energy economist Michael Grubb argued that the government has ‘kicked the only possible short-term supply option into the long grass’.
Public opinion. ECIU polling shows that the public backs energy efficiency measures as the most important method of reducing reliance on Russian Gas (84%), higher than more renewable energy (69%) and far higher than increasing domestic gas production (41%).
Non-doms. The news that Chancellor Rishi Sunak’s wife Askhata Murty claims ‘non-domiciled’ tax status, and thereby avoids paying UK tax on her overseas income, has raised awareness of this controversial rule. The non-dom scheme, which is virtually unique to the UK, dates back to the introduction of income tax in 1799 and was designed to help colonial investors avoid paying UK tax. Writing in OpenDemocracy, Kojo Karam explores the link between decolonisation and taxation, arguing that ‘decolonisation is not just a question for our universities and museums but also for our legal and financial system.’
Taxing the very rich. Institute for Fiscal Studies Director Paul Johnson notes that those receiving the highest earnings are highly concentrated in the finance sector. The ‘rentier’ income that financiers enjoy is not adequately taxed, he argues, and should be ‘at least taxed on the same basis’ as ordinary income tax from employment.
National insurance rise. Last week the Chancellor went ahead with the rise in National Insurance by 1.25 percentage points despite mounting opposition. The Federation of Small Businesses’ Martin McTague said that ‘The small business tax burden is now at its greatest since the 1950s.’ The Institute for Fiscal Studies (IFS) has a useful explainer on the changes.
European comparisons. In the Guardian the IPPR’s Carsten Jung compared the UK’s support for households facing huge energy bill increases with schemes implemented in other European countries. The German government has provided a €200 boost for people on benefits, as well as a €100 topping up of child support and at least €270 for people on housing assistance, next to a €300 lump sum payment (pre-tax) to all employees. Meanwhile, France and Italy have limited energy price increases through electricity tax cuts and requirements for state energy companies to sell at below market price.
Public backs benefits. There is cross-party support for social security to tackle the cost of living crisis, according to new research by centre-right think tank Bright Blue. It found that 72% of the UK public supports the idea that ‘benefit payments should be sufficiently high to allow people to pay for their costs of living, such as housing payments, buying essential food and heating their homes.’ Bright Blue’s Anvar Sarygulov said: ‘The Chancellor needs to stop being allergic to welfare, recognise the effectiveness of the Universal Credit system, and bring forward the next uprating of the benefits from April 2023 for a far more substantive, effective, and targeted intervention.’
A UK cryptocurrency? The Treasury has announced plans to make the UK a ‘global cryptoasset technology hub’, allowing stablecoins to be recognised as a valid form of payment. Stablecoins are digital currencies anchored to a traditional currency such as the dollar: see our recent Digest on digital currencies. The Chancellor has also instructed Royal Mint to create a non-fungible token (NFT) to be issued by the summer.