So how did Rachel Reeves’ ambition to be the “green chancellor” survive contact with battle in the budget? Reactions are, honestly, mixed.
The decision to freeze fuel duty and keep the 5p cut made by the Conservatives in 2022 is attracting some fury, not least because the tax relief is estimated to have raised UK greenhouse gas emissions by 7% since 2010. Reeves has been accused of doing “completely the wrong thing” for climate by making this decision at the same time as raising the bus fare cap from £2 to £3, and rail fares by 4.6%.
Paul Johnson, the director of the Institute for Fiscal Studies, said: “For goodness sake. Despite big tax rises overall, the chancellor has done it again. Fuel duty frozen and ‘temporary’ 5p cut kept. This government is supposed to care about climate change. And I’m willing to bet fiscal numbers assume increases into the future. How much longer?”
Hirra Khan Adeogun, the co-director of the climate charity Possible, said: “Fuel duty will now [have been] frozen for 15 years, while the cost of public transport has gone up and up each and every year. This is completely the wrong way around, and we need to move to a system which makes the greenest ways of getting around the cheapest and most convenient.”
Balancing that out, a little bit, was the announcement of taxes on air passengers, up to £2 for an economy short-haul ticket and £450 for a private jet.
Reeves also revealed that Defra is reviewing and possibly cutting flood-resilience funding and farming payments.
The Guardian reported last month that there would be cuts to flooding and nature friendly farming schemes. Experts and farmers have been urging the environment secretary, Steve Reed, and Reeves to hold back because cuts to flood defences cost more in the long term as people lose their homes and businesses. Meanwhile, it will be impossible to meet nature targets without paying farmers to restore their land for nature.
But Reeves confirmed in her budget that cuts to flooding and farming schemes are being considered: “The government is facing significant funding pressures on flood defences and farm schemes of almost £600m in 2024-25. While the government is meeting those commitments this year, it is necessary to review these plans from 2025-26 to ensure they are affordable.”
Tim Farron, the environment spokesperson for the Liberal Democrats, said: “This is incredibly shortsighted, undermining Britain’s already inadequate food security, creating even more uncertainty at a time when farmers desperately need certainty and support. The Conservatives utterly failed our farmers; Labour had the chance to do right by them, but have let them down.”
Ami McCarthy, the head of politics at Greenpeace UK, said: “Further cuts would be completely unconscionable when sewage is still being pumped into our rivers and seas, homes and livelihoods face growing risks from flooding, and our wildlife is suffering so much. The UK is one of the most nature-depleted countries in the world, and restoring nature is vital to lowering emissions – we need bold action from the government to turn this around.”
However, Ed Miliband’s Department for Energy Security and Net Zero came out of things well, with a 35% capital uplift and a new investment rule which will allow money to pour into renewable energy projects. Ed Matthew, the campaigns director at the independent climate thinktank E3G, said: “After years of flatlining investment, the government must now seize the opportunity of the investment rule to make the UK a clean energy superpower and boost green homes investment further. It’s the economic opportunity of the century.”
Shares in the North Sea oil companies Harbour Energy, EnQuest, Ithaca Energy and Serica Energy all bounded higher after the budget statement revealed that the windfall tax, which will increase the headline tax rate on oil and gas profits to 78% has a loophole. Oil and gas developers would still have access to 100% first-year capital allowances within the windfall tax regime. The budget also confirmed a decarbonisation allowance to encourage the sector to invest in cleaner, lower-emission technologies, which will be set at 66% and removed the 29% investment allowance until 2030. Harbour, EnQuest and Ithaca shares stabilised at about 3% higher than the previous day’s close by mid-afternoon while Serica’s shares remained about 10% higher. Equity analysts at Jefferies said the outcome was positive, contrary to most expectations in the industry.
Reeves also announced over £1bn next year to the warm home discount scheme, and a guarantee of investment of an initial £3.4bn towards heat decarbonisation and household energy efficiency between 2025-26 and 2027-28.
However, campaigners pointed out this is only half of what Labour promised in their manifesto. Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “The only way to bring down bills permanently is through investment in insulation, home improvements, renewables and infrastructure which will free us from volatile gas prices for ever.
“But in the budget, the Chancellor only confirmed half the spending commitment Labour pledged in their manifesto to the warm homes plan. And uncertainty remains around if ministers will be able to confirm the £13.2bn total needed to help people improve their homes.”
