No Easter Eggs in Spring Budget

There is a Victorian cartoon of a curate having breakfast with a Bishop. The Bishop points out that curate’s egg is bad, to which the young clergyman replies “I assure you, parts of it are excellent!”. This Spring Budget on 15 March (both in terms of energy and more generally) was a curate’s egg of a fiscal event.

The good parts – heavily pre-trailed – were good indeed. As Energy UK and consumer groups had been calling for, the £3 billion spent extending the Energy Price Guarantee (EPG) at £2,500 until the summer will save households £160, helping to dampen the increase in bills as other support is removed. And the rest? It was not so much bad as either vague or entirely absent.

Thankfully, there were no bad eggs at Energy UK’s Breakfast Briefing the following morning, with Daisy Powell-Chandler (head of energy and environmental practice, Public First), Rich Hall (chief energy economist, Citizens Advice), Chaitanya Kumar (head of environment and green transition, New Economics Foundation) and Vicky Parker (head of power and utilities, PwC) cracking open what the chancellor’s announcement meant for consumers and the energy sector.

Stretching egg-analogies beyond their natural breaking point, Powell-Chandler presented us with the concept of the “sweet souffle” budget. With more optimistic fiscal and economic forecasts and Hunt’s measured tones (and Dad jokes) it made for comparatively pleasurable consumption at the time, but afterwards left one feeling somewhat … empty.

Perhaps these mixed feelings are clearest when it comes to investment. The headline was the “full deduction” replacement of the super allowance, which would certainly see the government spend a lot of money (as the most expensive item in the budget). Parker explained the devil of this was really in the details, and there was a real chance investment in low-carbon generation would fail to fully benefit. Wind, solar and the like are long-term investments that often lose money in their early years, making first-year allowances less effective than they could be. Equally, the way that renewable projects tend to be joint or special ventures that are legally separate make it hard for them to properly benefit from the new allowances.

There were varying levels of scepticism from the panel on the CCUS proposals, but with broad agreement that more details were sorely needed. Kumar also dusted off past budgets to remind us of the last SMR competition, announced by Osborne in 2016. Panellists also questioned whether – with growing concerns around energy security – cost was the best lens through which Hunt could present nuclear

In the retail space as well, there was a sense of work to come. Although the EPG extension, support for households on pre-payment meters (PPM) and a surprise £500 million for households on heat networks do a lot of heavy lifting in the short term, the challenges start to mount next year. As Hall highlighted, market expectations are that while wholesale electricity prices are indeed set to fall, comparatively they will remain elevated, possibly twice the historic norm. This – and the need to find a long term solution to equalise PPM payments – will require proper reform of the retail market.

Both Citizens Advice/Public First (social tariffs) and New Economic Foundation (rising block tariffs) have proposals in this space that their representatives pitched. The answers aren’t straightforward, but Energy UK recognises the need for ensuring solutions because universal government support can’t continue forever.

There was disappointment in the wider transition to net zero. Energy efficiency got barely a mention, apart from the announcement (re-announcement?) of the Energy Efficiency Taskforce, on which Emma Pinchbeck, our CEO, will sit. When the audience asked our panellists why the government seemed to have so few ideas on energy efficiency, the basic answer was “it’s expensive and difficult”. True – in the short term at least – but not an excuse for inaction. And freezing fuel duty? An inevitability, even if we weren’t staring down a General Election.

Overall then, the Budget was excellent in parts, but it left a lot missing that policy makers will need to revisit. Thankfully, with a series of announcements set to come soon, on-going reviews such as REMA and, of course, the General Election – there are plenty of opportunities to set energy in the UK on the right path.