Chancellor John Healey today announced a British Industrial Competitiveness Scheme that will take 25 per cent off electricity bills for 10,000 firms “at the heart of British industry”, going live in April with backdated payments for energy costs this year.
Healey told MPs the conflict in the Middle East had pushed oil from around $70 a barrel to well over $100, while gas prices have nearly tripled since February. “For businesses, it means higher running costs and more expensive business loans,” he said.
He said the government’s priority would now be “first and foremost cheaper energy”, with the aim of bringing UK energy costs down in line with Europe.
Levies and longer-term reform
Healey said a new cost control framework would cover all aspects of energy bills, and that he would scrap the upcoming Gas Shippers Obligation, a levy to fund hydrogen projects, backing those projects directly from government instead.
The government will only buy and build new clean power projects that lower bills and can connect to the grid, Healey said. More older renewables will move onto fixed price contracts, and GB Grid will deliver cheaper, faster grid connections alongside reform of the institutions that govern the system.
He also pointed to last week’s approval of the Jackdaw gas field, which he said would add an estimated £2.9bn to the UK economy.
Households and motorists
The VAT cut on household electricity will run to July, which Healey said takes £50 off the annual price cap. When the cut was announced in July, the Treasury said it applied to domestic supplies, though non-VAT-registered small businesses qualifying for domestic energy VAT relief would also benefit.
From 2027, standing charges will be removed from household gas bills through Ofgem, with similar reforms to follow for electricity.
The 5p cut to fuel duty and the lower rate for red diesel will be extended to July, and the higher mileage rate will rise from 25p to 35p per mile.
Reaction
Peter Brennan, director general of UK Steel, called the Budget a missed opportunity for steelmaking. “For around £50 million a year, Ministers could take a major step towards closing the electricity price gap with our European competitors. Yet once again, British steelmakers have been left waiting,” he said.
Molly Monks of Parker Walsh said: “However, the key questions will be which businesses qualify, how quickly the support reaches them and whether the savings are sufficient to offset the wider costs they face.”
Lucy Mangan, partner and head of tax services at Menzies, said: “Households will see some relief on their gas bills, but firms facing the same energy costs have been left out in the cold.”
Mike Thompson, chief operating officer at Leasing Options, said fuel duty would stay at 52.95p per litre until July. “With the recent all-time high for diesel, another freeze would provide greater certainty and help businesses and drivers plan their motoring costs further ahead,” he said.
Yesterday, two British manufacturers urged Healey to cut energy and employment costs in the Budget.
