December 1, 2022

Fall Statement Imposes Taxes on Electric Vehicles, Fossil Fuels and More

Major tax changes for energy companies, fossil fuel suppliers and electric vehicles headlined a fall statement today that will have significant impacts for many engineering and technology companies.

Chancellor Jeremy Hunt has increased the windfall tax on oil and gas giants from 25% to 35% and granted it a two-year extension, so it will now run until March 2028.

A 45% levy on low-carbon electricity generators has also been announced, which is expected to raise £14billion next year.

Although they are not dependent on the production of energy from fossil fuels, low-carbon installations such as nuclear power plants, wind farms, solar parks, hydroelectric projects and biomass burners have nevertheless recorded windfall profits this year as high wholesale gas prices drove up the price of generated electricity. from any source.

The announcement saw shares of SSE, which runs gas-fired power plants alongside hydroelectric plants and wind farms, tumble 3.75% just a day after reporting a tripling of profits this quarter.

Shares in Centrica also fell 1.1%, while Drax – which runs a large biomass power station in North Yorkshire – fell 3.9%.

Hunt also announced an additional £6billion investment in energy efficiency from 2025 to help meet a new ambition to cut energy use in buildings and industry by 15% by 2030.

This could save £28billion (at current prices) on the national energy bill or £450 on the average household bill, Hunt said.

Other changes include the removal of electric vehicle exemption from vehicle excise duty from April 2025, which aims to make the car taxation system “more equitable”.

In February, transport committee MPs warned that the government would face a major funding shortfall for road infrastructure if it did not develop a new tax on zero-emission vehicles.

With sales of used electric cars soaring this year, the UK car market is set to become less and less lucrative for the taxman as the technology matures.

While Hunt initially removed the Mini Budget’s £2,500 cap on household energy prices when he took up his new role last month, he has extended the energy price guarantee by 12 additional months from April at a higher cap of £3,000.

There will also be additional payments to help with energy bills for pensioners, poorer households and people with disabilities.

The Chancellor also doubled down on her climate pledges and said the government remained committed to pushing ahead with construction of the new Sizewell C nuclear power station despite rumors the project was to be delayed or scrapped as part of spending cuts .

“We remain fully committed to the historic Glasgow Climate Pact agreed at COP26, including a 68% reduction in our emissions by 2030,” Hunt said.

The construction of new infrastructure such as roads, train lines and communities will also be safeguarded with over £600bn of capital investment over the next five years.

While there have been no new funding announcements for digital infrastructure projects, current funding levels should be maintained.

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