The UK Government has long promised to spark the Green Revolution on our road to net zero, but how does Budget 2021 help achieve those goals?
We watched the 2021 Budget announcement and have addressed some of the key announcements, as well as one glaring omission.
Green Homes Grant
The first major piece of stimulus for the green energy sector to come out of the Covid-19 crisis was the Green Homes Grant.
Announced in July 2020, the Green Homes Grant promised to fund up to two-thirds of the cost of energy efficiency improvements that consumers made to their homes. It would pay for insulation, heat pumps or a myriad of other green improvements.
Unfortunately, the scheme that was initially briefed to the media didn’t actually come to fruition, with many aspects dropped before launch. That includes funding for energy efficient lighting, which was due to be an eligible upgrade under the Green Homes Grant, but was later dropped.
So, what’s to come of the Green Homes Grant? Well, the scheme is set to continue until April 2022, but despite initial popularity, with the majority of UK households promising to leverage the scheme, the reality is that not many people are that interested in accessing cash under the Green Homes Grant.
In fact, the UK Government is set to gut £1.5 billion from its budget, despite extending it by an extra year. That will be a huge blow for a scheme that was helping directly fund home energy efficiency improvements.
The Green Homes Grant wasn’t mentioned by name in the 2021 Budget, so it’s safe to say that this policy hasn’t been revitalised and is set to live its remaining days as a shell of what was once promised.
Boost for UK infrastructure projects
One of the key aspects of the promised Green Revolution was the focus on improving the UK’s ailing infrastructure. To do this, the Government is launching a new infrastructure bank in Leeds, which will invest in both public and private projects with an emphasis on our road to net zero.
The bank will be up and running this Spring, with an initial capitalisation of £12 billion. It will target projects that will help with achieving net zero emissions by 2050, with the UK Treasury estimating that it will support at least £40 billion of total investment in infrastructure.
Chancellor Rishi Sunak said that the bank will join private investors in co-investing in infrastructure projects, with a mix of loans and Government-backed guarantees to be used. The infrastructure bank may also decide to take equity stakes in certain projects.
So, why is there going to be a UK infrastructure bank? Well, it’s being set up to replace the European Investment Bank, which will no longer offer the 8 billion euros a year of investment to UK projects.
Supporting the next generation of offshore wind
The UK Government has announced plans in the 2021 Budget to support the next generation of offshore wind through investment in port infrastructure upgrades. Both Teeside and Humberside are being specifically targeted for upgrades, with the Government making an offer, in principle, to the Able Marine Energy Park on Humberside for the next generation of offshore wind.
This isn’t the first time we’ve heard about the Government supporting offshore wind, with Prime Minister Boris Johnson previously committing £160 million to upgrading the UK’s offshore wind infrastructure.
At the time of the announcement in November, Hugh McNeal, CEO of RenewableUK, commented, “The government has raised the ambition for offshore wind and renewables, and our industry is ready to meet the challenge. A green recovery with renewables at its heart will be good for consumers and jobs, as well as helping to meet our 2050 net zero emissions target. Support for new floating wind projects will ensure the UK stays at the forefront of global innovation in renewables and provides new opportunities in the low-carbon transition.”
Supporting the next generation of workers
One of the key problems that the UK Government hopes to solve by sparking a new Green Revolution is the lack of well-paid, highly-skilled jobs available to young people in the UK. That’s why during the midst of the Covid-19 pandemic, the Government announced a new apprenticeship incentive scheme which would directly reward businesses for taking on new apprentices.
At the time of the announcement, businesses were told that they would receive £1,500 for every new apprentice that they brought on-board. Now, the UK Government is doubling the incentive, with those hiring apprentices of any age receiving £3,000 as a reward.
The hiring of apprentices is more important than ever, and despite a drop in apprenticeships in 2020, we’re hopeful that 2021 will see a surge of places made available. After all, the UK electrical industry desperately needs more apprentices if it’s going to deliver on the Government’s promised Green Revolution.
Crowdsourcing green investment
In November 2020, the UK Government issued the first ever Sovereign Green Bond, this will be followed by the issuance of further bonds in the future that will help finance projects that will tackle climate change. However, the Government has realised that investing in green technologies could be really popular with UK consumers, so is introducing something that will help supercharge investment in the Green Revolution.
National Savings and Investments, also known as NS&I, will be introducing a new savings account for consumers who want to help fund green projects. The new green savings bond will be linked to the Sovereign Green Bonds, and while interest rates are yet to be announced, the new account should help free up even more cash for key improvements that will deliver the long-promised Green Revolution.
Could the new super deduction in tax help spur green investment?
One area that could potentially benefit electrical firms in the UK is the new super deduction that was a surprise announcement of the 2021 Budget. This allows firms investing in plant and machinery, which includes major electrical works, to benefit from a 130% first-year capital allowance.
With corporation tax set to rise in the UK, this new super deduction could help firms wishing to reduce their tax bill. It will allow companies to cut their tax bill by up to 25p for every £1 they invest, which would offset any tax increase.
There’s a huge potential for the electrical industry to receive a huge share of this investment, as companies also look to invest in reducing their impact on the environment. That means businesses installing solar panels and energy storage can now claim 130% first-year capital allowance, making now a perfect time to invest.