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What Rishi Sunak’s Spring Statement means for the climate and environment

From VAT cuts to fuel duty, here’s what climate, environment and energy groups make of the chancellor’s 2022 Spring Budget.

Rishi Sunak’s hotly-anticipated Spring Statement has laid out the current financial position of the UK and outlined measures to tackle the ongoing cost of living crisis

With many countries threatening to fall back on oil as the Ukraine war pushes up energy prices further, environmental and climate groups have been waiting to see whether the chancellor would address the climate crisis.

From VAT cuts to fuel duty, here’s everything you need to know about what the statement – often known as “the Spring Budget” – did and didn’t do for the climate and environment.

Fuel duty cuts

One of the key announcements made in the Spring Budget was a cut to fuel duty, with the rate slashed by 5p from March 23 2022. The cut will last until March 2023.

The move has been made in a bid to reduce the high costs of fuel for car drivers around the country, but environmentalists have criticised the tax cut, saying it will incentivise more driving at a time when we should be reducing carbon emissions. 

Petrol has reached record high prices in recent weeks due to growing demand for fuel coupled with the Ukraine crisis. 

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Climate and environmental groups say the government should have slashed public transport costs instead, a move which would have encouraged uptake of greener transport options.

This would also have benefitted the poorest more – as a quarter of Brits don’t have access to a car.

According to analysis by the New Economics Foundation (NEF), only seven per cent of savings from the cut will go to the poorest fifth of households, while a third will go to the richest.

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“Cutting fuel duty for drivers without helping those reliant on public transport is a slap in the face for the planet. Lowering the price of fuel simply increases the demand for it, and increases our reliance on Russian oil,” said Matt Finch of the European Federation for Transport and Environment.

VAT cut on retrofits

Environmental campaigners have long been calling for a removal of VAT on retrofit of buildings in order to make insulation measures cheaper.

Sunak’s Spring Budget announced that VAT on energy-saving materials such as solar panels, heat pumps and roof insulation will be cut from five per cent to zero for the next five years to help households make their homes more energy-efficient.

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The chancellor said the move would wave an average of £1,000 on eco upgrades and reduce utility bills by £300 per year.

Energy-efficient homes with low-carbon heating systems can bring down energy costs for households while producing heat in a greener way.

Transitioning away from oil and gas will also help the UK end its reliance on foreign imports of oil and gas.

Jess Ralston, analyst at the Energy andClimate Intelligence Unit (ECIU), said the move was an “immediate boost” for families facing higher bills, but that there are “lots more tools” the chancellor could have used to mitigate rising costs.

“Low interest loans have been hugely popular in Germany and could unleash private sector investment into sealing up our leaky homes, while net zero policies like incentivising the switch away from gas boilers will help to shield Brits from future fossil fuel market volatility,” she said.

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Critics have also said that lowering VAT on eco materials will do little to help people in low-income households who often rent from landlords.

Jonathan Webb, a senior research fellow at IPPR North, said the promised VAT cuts for energy efficiency “won’t create a significant incentive for low-income households and will do little to help those that do not own their own home and are reliant on their landlord to improve their property”. 

No windfall tax for oil and gas companies

The Labour Party and a number of environmental and climate campaigners have been calling for a windfall tax on oil and gas companies in order to help struggling households through the cost of living crisis.

A windfall tax is a one-off tax on a company or group of companies where they have benefitted from something they weren’t responsible for – in this case, high energy prices.

Oil and gas companies across the globe have made record profits as the price of oil and gas has soared, and some countries – such as Spain – have already levied a windfall tax to help ease rising costs of living for ordinary people.

Rishi Sunak, however, declined to introduce a windfall tax in the Spring Budget.

Shadow chancellor Rachel Reeves criticised the chancellor for his decision, saying that Labour advocated a windfall tax to tackle the cost of living crisis.

“Because of the continued rise in global oil and gas prices, [a windfall tax] today would raise over £3bn. That’s money that could be used to help families and pensioners and businesses,” she said.

Friends of the Earth’s head of policy, Mike Childs, said: “It’s astonishing that the chancellor continues to allow fossil fuel firms to rake in enormous profits while cash-strapped households struggle with their bills. 

“A windfall tax on these companies could have funded energy efficiency and eased the burden on those most affected. The measures introduced today will only scratch the surface of what’s needed to help people save energy.”

Road tolls?

There had been some speculation that Sunak’s budget would announce the introduction of road tolls to compensate for revenue the government has lost from electric vehicles not paying fuel duty.

Currently, the M6 toll road in the West Midlands is the only major road which requires payment to use. It costs cars £7.10 on weekdays and £12.90 for HGVs.

But the chancellor made no indication that road tolls would be introduced during his speech.

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