Skip to main contentChancellor Rachel Reeves presented the first Labour budget in 14 years yesterday, focusing on rebuilding Britain and restoring economic stability.
Key points included a £40bn increase in taxes to boost public finances, a 6.7% rise in the national minimum wage starting next April, a 1.2% increase in employers’ national insurance to 15%, and the abolition of the non-dom tax regime, along with the removal of the “outdated concept” of domicile from the tax system starting April 2025.
In addition to these significant developments, the Chancellor introduced measures aimed at the UK energy sector. She emphasised the government’s goal to transform Britain into a clean energy superpower. To support this mission, the government committed to multi-year investments in carbon capture and storage. Additionally, changes impacting the oil and gas industry were announced to safeguard the UK’s energy sector.
Additional measures announced
- The Energy Profits Levy (EPL), also known as the windfall tax, will be increased from 35% to 38%. The 29% investment allowance will be removed, and the levy will be extended until March 31, 2030. To ensure stability during the energy transition, 100% first-year allowances under the EPL will continue. Additionally, the government plans to consult in early 2025 on how the oil and gas tax regime should handle price shocks after the EPL ends in 2030.
- Main Climate Change Levy (CCL) rates on gas, electricity, and solid fuels will increase by the Retail Price Index (RPI) in 2026-27, maintaining an incentive for energy efficiency. The rate on LPG will remain frozen, and reduced rates will stay fixed as a percentage of the main rates.
- Carbon Price Support (CPS) will be maintained at £18 per tonne of CO₂ for 2026-27, balancing a strong carbon price with stable household energy bills.
- UK CBAM will launch 1st January 2027, this measure will add a carbon price to imports in sectors at risk of carbon leakage, including aluminium, cement, fertiliser, hydrogen, iron, and steel. There will be exemptions for Glass and Ceramics to allow for further industry-government feasibility discussions. There will also be an increase on the import threshold. Only businesses importing £50,000 or more in CBAM goods annually will need to register, up from the previous £10,000 threshold.
- A £125 million investment in Great British Energy, which will be based in Aberdeen. Additionally, the government has pledged support for two electrolytic hydrogen projects in Scotland (Cromarty and Whitelee) and two in Wales (Milford Haven and Bridgend). These initiatives aim to boost low-carbon hydrogen production and generate high-quality local employment opportunities.
- Eleven new green hydrogen projects in England, Scotland, and Wales will receive financial backing through the Hydrogen Business Model, which was initially launched during Boris Johnson’s tenure.
- Allocating £134 million to enhance port infrastructure for floating offshore wind, which could benefit the hydrogen industry.
- Extending incentives for electric vehicle (EV) company car fleets over the long term, including adjustments to Vehicle Excise Duty First Year Rates and Company Car Tax regimes, as well as continuing the 100% First Year Allowances for electric cars and charge points for another year. Additionally, a commitment of £200 million in 2025-26 to speed up the installation of EV charging points, with funds aimed at helping local authorities enhance on-street infrastructure.
- Allocating £3.9 billion in 2025-26 to Carbon Capture, Usage, and Storage Track-1 projects to reduce industrial carbon emissions, enhance flexible power generation, and leverage the UK’s geographic and technical advantages.
- A commitment to invest £3.4 billion initially in the Warm Homes Plan from 2025-26 to 2027-28, aimed at improving heat decarbonisation and household energy efficiency, with the goal of insulating up to 350,000 homes.
- Extending the freeze on fuel duty into 2025 by keeping the 5p reduction in place.
- A commitment of £2.7 billion to fund the development of Sizewell C through 2025-26, as investment in new nuclear energy is crucial for achieving energy security, providing clean power, and creating thousands of skilled jobs.
- £1 billion will be allocated over three years to support numerous local energy projects aimed at reducing carbon emissions in public buildings through the Public Sector Decarbonisation Scheme.
- Aggregates Levy: The 2025-26 rate will increase in line with RPI inflation
Reactions to the budget
Reacting to this much-anticipated Budget. Dhara Vyas, Energy UK’s CEO-designate, said:
“Driving investment, growth and productivity were the focus of much of the Budget speech and it was encouraging to hear the Chancellor underlining the role clean energy and our industry can play in an economic revival. In additional to earlier announcements like the removal of the onshore wind ban, the increased budget for new clean energy developments through the Contracts for Difference scheme and the establishment of GB Energy, we welcome further funding for emerging technologies with 11 new green hydrogen projects to add to that recently announced for carbon capture.”
RenewableUK welcomed the Chancellor’s backing for floating offshore wind and green hydrogen but stressed the critical need for a comprehensive industrial strategy to enhance supply chains and create jobs. RenewableUK’s Chief Executive Dan McGrail said:
“We welcome the Chancellor’s commitment to use the National Wealth Fund to transform ports around the UK into new industrial hubs for offshore wind manufacturing and assembly, building and supplying projects here as well as exporting our cutting-edge technology worldwide.
“We know that, with the right grants and incentives from the National Wealth Fund, the UK has the potential to secure hundreds of millions of pounds of investment in offshore wind alone, building the supply chain and creating jobs. Given fierce international competition, the sooner that process starts the better.
“Ultimately, with co-ordinated support between Government and industry, we believe the UK could triple the size of its offshore wind supply chain, boosting the economy by £25bn over the next decade.”
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