Spring Budget 23: £20bn Carbon Capture and Nuclear 'Renewable Energy Reboot'
On 15 March, Jeremy Hunt, the Chancellor, declared plans to increase investments in nuclear and carbon capture utilisation and storage (CCUS) projects. His Budget pledged to raise the UK's energy security and make the nation a "science and technology superpower".
Hunt today confirmed the intention to invest £20bn in Carbon Capture Utilisation and Storage (CCUS) initiatives over the next two decades. The Treasury also announced that the list of ventures for the first stage of CCUS implementation will be revealed during the course of this month.
Hunt indicated that the programme, which is projected to result in the capture of 20 to 30 million tonnes of CO2 by 2030, would provide employment for 50,000 people and establish the groundwork for the UK's proposed zero-carbon industrial centres.
The Prime Minister also declared the introduction of the Great British Nuclear agency that will be responsible for managing the competition for the UK's initial small modular reactor (SMR).
Hunt stated that the government would pick the best technologies through a competition by the end of the year and, if successful, provide co-funding for the UK's first small modular reactor (SMR) facility.
The Chancellor in the Spring Budget 23 announcement has revealed that nuclear energy is to be regarded as an environmentally-friendly form of power.
The chancellor commended the accelerated growth of the UK's renewables sector, applauding the ongoing success of the offshore wind industry and noting that more than 90% of the UK's solar capacity had been developed while the Conservatives were in power. He also jokingly mentioned that despite this, given that the wind doesn't always blow and the sun doesn't always shine, even while the Tories are in office, there is an urgent requirement to bring forward other dependable clean energy sources, such as new nuclear and CCUS projects.
In his speech, Hunt declared that the government would be continuing the Climate Change Agreement scheme for an additional two years, granting companies that make investments in energy efficiency measures a sum of £600m in tax relief.
He further declared, as widely predicted, the Energy Price Guarantee for domestic customers will be prolonged for an extra three months, keeping the average domestic annual energy bill at £2,500, and the fuel duty freeze will be extended for one more year.
The chancellor stated that the UK is set to become the first major economy to introduce a "full expensing" policy in relation to corporation tax, whereby businesses are allowed to deduct the entire cost of certain pieces of plant and machinery from their taxable profits.
The new capital allowance policy will be in effect for a three-year trial period with the aim of making it a permanent fixture. This is in order to make the UK an attractive destination for businesses to establish themselves and to invest in improving their infrastructure and operations.
Hunt declared the policy would create a 25p reduction for every £1 put in and provide a £27bn tax break for businesses during the next three years. He proclaimed, "This decision makes us the only major European nation with full expensing and provides us with the joint most generous capital allowance system of any developed economy."
Hunt declared he will preserve the Treasury's plan of allowing companies to deduct half the cost of "special rate assets" the first year of the acquisition. These assets include those which are essential for businesses to shift to green energy and more efficient activities, such as thermal insulation and solar panels. The tax break that was initially supposed to expire in 2023 will now be valid until March 2023.
Hunt has released a new tax credit for small and medium-sized companies that focus on research and development of green technologies. This credit allows them to receive £27 for every £100 spent.
In order to be eligible for the credit, businesses must expend over 40% of their total spending on research and development. "It is a £1.8bn package of assistance, aiding 20,000 innovative companies who are continuously making Britain into a science superpower," Hunt declared.
The chancellor made a point of mentioning the targeted tax reliefs, specifying that the UK's corporate tax system would stay competitive even with the upcoming increase in the headline corporate tax rate to 25%. He emphasized the need for the new plan, considering that the earlier cuts in corporate tax had not been sufficient to enable the UK to reach the same level of investment as France and Germany.
The Spring Budget of 23 saw the annual investment allowance for businesses boosted to a sum of £1 million. This move will be sure to provide a significant boost to many firms.
Furthermore, the government has declared that it will be providing £80 million for the next five years to twelve designated "investment zones" in the form of tax breaks and investment funds. These areas will have more lenient tax regulations for businesses.
Five priority areas where actors in each zone must focus their efforts are green industries, alongside digital and tech, life sciences, creative industries, and advanced manufacturing sectors.
Hunt declared that the government desired to collaborate with new zones in each of the four UK nations. He stated that in order to be selected, each area had to name a spot that would allow for a progressive and creative cooperation between local governments and colleges or research institutes, which would in turn spark new innovation clusters.
Those advocating for local authorities to have more resources and authority to create area-specific decarbonisation plans that take into consideration local needs will be delighted with the devolution agreements for the West Midlands and Greater Manchester Combined Authorities. For increased oversight, both authorities will have additional control to achieve their objectives, such as their objective of reaching net-zero emissions.
It is probable that the nuclear and CCUS industries will welcome the declarations, however, there was little in the Budget to support other sectors such as renewables, energy efficiency, electric vehicles, and nature. In the meantime, the active travel sector has been left stunned from the announcement last week that its allocation for the remainder of the parliament has been diminished by 80%.
The green economy is anticipating additional policy decisions in the near future, with the Treasury today announcing that the government will divulge further measures this month to ensure energy security and abide by the net-zero obligations as mandated by the High Court before the end of March. This is in addition to the measures presented in the Spring Budget.
In response to the Budget address in the Commons, Labour leader Keir Starmer harshly criticized the lack of ambition and support for business investment, referring to it as a mere "sticking plaster" for the country's weak economic growth, prolonged real terms wages stagnation, and 13 years of economic misfortune under the Conservative Party.
The speaker declared that following 13 years of this government, the economy necessitated critical repairs. However, he asserted that, similarly to countless others around the nation, this Budget has left them stranded in the waiting room with just a Band-Aid available, with the nation directed towards a course of supervised decrease, lagging behind other countries. Thus, he concluded, the ailing man of Europe has been reincarnated.
The Labour leader reminded the public again of the multiple admonishments from the economic and political worlds in the recent past that, if the UK wants to stay competitive with the US, EU, and China, the government needs to do much more.
Starmer declared that the Budget was lacking in terms of "true ambition" with regards to industrial strategy and clean energy. He reiterated his comment that the conflict in Ukraine did not lead to the prohibition of onshore wind, the discontinuation of home insulation projects, or the deterioration of our gas storage facilities.
Starmer emphasized that Britain is capable of great things in the fields of science, innovation, and technology, but that it needs to start leading rather than lagging. To do this, he said, an industrial strategy is necessary to eliminate obstacles to investment, but the announcements made today do not go far enough.
G7 countries have the lowest investment among their peers, and the rest of the world is aware of this. Others are preparing for the competition for the prospects of the future, and we must be ready to join in on the contest, instead of just getting ready.
It can be said that the effects of global warming have become increasingly evident in recent times. The signs are everywhere - from rising temperatures, to melting icecaps, to more frequent and intense storms. These warnings have become hard to ignore, and it is clear that we must take action to reduce the impacts of climate change.