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Press Release

Autumn Statement 2022: energy response

Alasdair Grainger, Net Zero Director, Grant Thornton UK LLP, said:

“The Chancellor did not deliver a significant change in approach on energy taxation in today’s announcement – but he did seek to convert some of the higher profits into tax to fund government spending. While there was a helpful rebalancing of focus towards the demand side, with new funding promised for energy efficiency, this will not actually be in place until after the next election (2025).

“No further detail on how businesses will be supported with energy bills after the end of the current price freeze in March 2023 was provided – but a “review” is underway.

“Household support will be increased (to £3000) and extended, and those households that use alternative fuels from the gas main will see a doubling of support to £200. Keeping with the theme of the overall statement, the most vulnerable will be protected with additional cost of living payments of £900 for households on means-tested benefits, £300 to pensioner households and £150 for individuals on disability benefits.

“In terms of direct taxes, electric vehicles are set to pay road tax (or Vehicle Excise Duty) – but not until 2025. For oil and gas, the recently introduced windfall tax (or the “Energy Profits Levy”) will move from 25% to 35%. The Levy also reduces the investment allowance from 80% to 29% and introduces a new decarbonisation allowance, set at 80% for upstream decarbonisation expenditure. Importantly, this change means the marginal tax rate for the oil and gas sector is now 75%.

“In a move that had been muted in the run up to the Statement, there will be a new 45% levy on electricity generators from 1 January 2023. This new tax will be levied on nuclear, biomass wind and solar, as long as the project does not currently benefit from a Contracts for Difference contract (which already limits the upside available to the generator). In practise, this will only impact older, larger assets, typically brought forward under the renewables obligation scheme.

“The previous announcement of a new nuclear plant at Sizewell C was again referenced, with contracts due to be signed “within weeks”

“Critically, the Chancellor referenced the Net Zero 2050 target on the floor of the house and all of the measures announced today are likely to be compliant with the government policy response to Net Zero.”

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