Kwasi Kwarteng has promised to turbocharge the development of a raft of infrastructure projects by streamlining the planning process for road, rail, nuclear, wind energy, hydrogen, CCS, and oil and gas projects, as he branded his hotly-anticipated mini-Budget this morning as a plan for growth.
In a surprise move, the planning reforms included a commitment to lift the effective ban on new onshore wind projects in England by putting them on the same footing as other key infrastructure projects. However, the boost for low carbon infrastructure development came alongside similar moves designed to accelerate investment in high carbon projects that are set to face fierce opposition from green groups.
The Chancellor said the government was “getting out of the way to get Britain building” through its new ‘Growth Plan’, which sets out a raft of major tax cuts alongside plans to ditch or curtail green planning rules and habitat regulations, and support homes and businesses facing soaring energy bills and inflationary pressures.
The plan includes a “non-exhaustive” list of over 100 nationally significant infrastructure projects which the Treasury said would be “accelerated as fast as possible” through planning reforms and streamlining of the development consent process, with the aim of getting “the vast majority starting construction by the end of 2023”.
Alongside 86 road building and safety schemes, the list includes both Hinkley Point C and Sizewell C nuclear power projects, seven offshore and floating wind leasing rounds covering around 80 projects, two government funding schemes for electric vehicle (EV) charge points, five hydrogen production and infrastructure schemes, as well as 10 national rail and 15 local rail, bus and tram projects.
As such the plans promise to provide a major boost to the government’s Net Zero Strategy, given planning constraints remain one of the biggest barriers to low carbon infrastructure development. But the list of priority projects also includes five oil and gas projects, including phase one of the controversial Cambo field in the North Sea, which campaigners fear could pose a threat to the UK’s long term emissions targets.
In a surprise move, Treasury documents released alongside Kwarteng’s speech signal the government’s intention to lift the long-held block on new onshore wind farms in England, with a pledge to “unlock the potential of onshore wind by bringing consenting in line with other infrastructure”.
The changes were welcomed by Greg Jackson, CEO and founder of Octopus Energy, who hailed it as “a huge step which will unleash the power of British onshore wind energy, reducing bills for all”.
“Onshore wind is cheap and incredibly popular with Brits – more than 13,000 people have asked us for a wind farm in their area,” he added. “But unnecessary red tape has meant it has taken on average seven years to build and connect a new onshore wind farm. In reality, they can be built in months. By putting onshore wind on the same playing field as other technologies, we can turbocharge our transition to net zero, increase the UK’s energy security, and wean ourselves off expensive gas for good.”
Although Kwarteng made scant mention of the net zero transition and clean energy development in his speech to Parliament, the documents tout home growth low carbon energy sources such as nuclear, hydrogen, carbon capture utilisation and storage (CCUS) and renewable technologies – alongside increasing domestic gas supplies – as crucial to boosting domestic energy security and delivering on climate goals.
“By 2023 the government is set to increase renewables capacity by 15 per cent, supporting the UK’s commitment to reach net zero emissions by 2050,” the Growth Plan states.
The Plan also delivers a boost for energy efficiency – widely touted as a crucial means of cushioning the impact of soaring energy bills for businesses and households for the long-term – promising to place new obligations on energy suppliers to “help hundreds of thousands of their customers to take action to reduce their energy bills”, in a move it predicts could deliver an average saving of around £200 a year per household.
“This help will be worth £1bn over the next three years, starting from April 2023,” it states. “Support will be targeted at those most vulnerable, but will also be available for the least efficient homes in lower council tax bands.”
In addition the government said it would “imminently” open applications to up to £2.1bn over the next two years to support public sector buildings invest in energy efficiency and renewable heating.
The increase in funding for energy efficiency schemes is likely to be welcomed, but the promised funding falls well short of the £5bn package the industry backed Energy Efficiency Infrastructure Group (EEIG) had proposed.
Separately today, the Department for Business, Energy and Industrial Strategy (BEIS) announced a £49.4m funding boost to support heavy industrial firms – including steel, ceramics, pharmaceuticals and food production – switch away from expensive fossil fuels towards cheaper, greener fuels and energy sources. The government said the move would support efforts to decarbonise industry in line with the UK’s 2050 net zero target.
Kwarteng also provided further details on the government’s energy security strategy, promising “significant interventions” in the energy market to reduce costs and improve long-term supply resilience.
New measures include plans for a £40bn Energy Markets Financing Scheme, delivered alongside the Bank of England, in order to provide a backstop source of additional liquidity for energy firms that are “in otherwise sound financial health” to help them cope with extraordinary fluctuations in wholesale energy prices, the government said. It will be limited to firms “systematically important” to the UK economy, with liquidity provided through a 100 per cent guarantee delivered through commercial banks, with applications set to open on 17 October.
The Treasury also confirmed a flurry of measures already trailed in recent days and weeks ahead of today’s Growth Plan, including moves to lift the ban on fracking in England, hand out further licenses for North Sea oil and gas exploration, and curtail green planning regulations such as habitat protection rules in almost 40 new low tax and low regulation ‘Investment Zones’ across the country in a bid to incentivise investment from businesses and developers.
The plans come just a day after the government confirmed it is to relax the proposed climate compatibility test on new North Sea oil and gas projects, angering environmental campaigners. The government confirmed it was scrapping three out of six proposed tests that new fossil fuel projects would have to comply with, including requirements to consider the impact of so-called Scope 3 emissions that result from fossil fuels being burned, whether new projects would add to global oil and gas production that endangers the Paris Agreement, and whether companies are also investing in clean energy. Greenpeace’s Philip Evans said the changes meant the climate compatibility checkpoint was now “a sham”. “It allows the government to rubber-stamp oil and gas licences as being climate-friendly,” he added.
The planning reforms come on top of previously-announced measures aimed at cushioning the impact of soaring energy bills this autumn and beyond, including a freeze on average household bills of £2,500 a year from next month and an “equivalent” plan to curb bills for businesses for at least six months.
The government also confirmed plans to negotiate new 15-year contracts for energy generators such as nuclear and renewables projects in a bid to drive down energy costs – a proposal that has divided energy industry experts with some predicting it could help curb bills and others warning it could lock in higher than necessary prices for the long term.
Kwarteng told Parliament today he expected the costs of the full energy support package to be in the region of £60bn over the six months starting from October.
“The estimated costs of our energy plans are particularly uncertain given volatile energy prices, but based on recent prices, the total cost of the energy package for the six months from October is expected to be around £60bn pounds,” he told Parliament. “We expect the cost to come down as we negotiate new, long term energy contracts with suppliers.”
The moves form part Kwarteng’s wider vision for a low tax, low regulation approach to tackling the UK’s troubling economic headwinds and cost-of-living challenges, which he characterised as a “new era focused on growth” that would break the “vicious cycle of stagnation” seen over the past decade or more.
Announcing a raft of cuts to income tax, national insurance and stamp duty, he argued that higher taxes on labour and capital “have hampered further growth”, and promised to deliver “in due course” a more detailed fiscal plan alongside a full independent economic forecast from the Office for Budgetary Responsibility (OBR), the latter of which was absent from today’s statement.
“We are at the beginning of a new era,” Kwarteng told Parliament. “As we contemplate this new era, we recognise that there is huge potential in our country. We have unbounded entrepreneurial drive. We have highly skilled people. We have immense global presence in sectors like finance, life sciences, technology, and clean energy.”
“But there are too many barriers for enterprise,” he continued. “We need a new approach to break them down. That means reforming the supply side of our economy. Over the coming weeks, my Cabinet colleagues will update the House on every aspect of our ambitious agenda. Those updates will cover: the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.”
But the speech drew a withering response from Shadow Chancellor Rachel Reeves and concerns on the currently market, as the pound fell again to a 37 year low.
Reeves highlighted that today’s plan is the sixth growth strategy from the government over the past 12 years, accusing the Chancellor of effectively admitting to over a decade of Conservative economic failure.
The new plan secured a cautious welcome from CBI Director-General Tony Danker who welcomed the move to deliver “long overdue” reforms to planning rules. “Taking action to get Britain’s economy moving again by beginning construction on transport and green infrastructure projects shows immediate delivery,” he said. “A simpler, smarter approach to tax can pay dividends, and firms will be keen to make the most of the investment incentives on offer. It’s not perfect – it’s just the beginning – but there’s plenty business can work with. The Chancellor signalled more proposals to come this Autumn and these will be vital to sustain momentum on growth.”
However, Julie Hirigoyen, chief executive at the UK Green Building Council, said the mini-Budger represented a “missed opportunity” that “prioritised economic growth at the expense of crucial climate and environmental targets [when] the reality is that these objectives should not necessarily be at loggerheads”.
“We welcome the Chancellor’s intentions to improve the efficiency and reduce the complexity of our planning system,” she said. “Yet it is vital that any planning reforms don’t create a free-for-all approach to new development at the expense of our legally binding climate commitments and nature recovery goals. Good regulation is welcome by industry, as it provides a level playing field for those who want to build high quality development. Without robust environmental safeguards in this deregulatory drive, developers and housebuilders are forced into a ‘race to the bottom’.”
She also warned that the modest increase in energy efficiency funding was an inadequate response to the energy crisis gripping the country. “Instead of accelerating growth by boosting green industries to upgrade the nation’s homes and businesses, there’s a mere fig leaf of coverage to help address the poor quality of our building stock in the short term,” she said. “The long term structural and financial plan required to address energy efficiency and high fuel bills in the longer term remains worryingly absent.”
And the new plan was given short shrift by green groups, who accused the government of “ignoring common-sense, win-win solutions to bring down bills and carbon emissions, such as stopping energy waste, heat-pumps and solar panels”.
“Failing to properly tax the obscene profits of fossil fuel giants and encouraging bankers to get richer is reckless and unfair,” said Rebecca Newsom, head of politics for Greenpeace UK. “Rather than seeking to deregulate and attack those on benefits, the new Chancellor should be looking for ways to raise taxes on those profiting from the crisis. This could help fund emergency support for households, and cover the vital investment needed in home insulation to help cut our energy bills and climate emissions once and for all… Instead of boosting the economy through investments in green infrastructure, public services and skills training, the government’s plan is little more than a charter for fossil fuel profits and casino capitalism.”