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The Autumn Statement

November 18, 2022

By Paul Homewood

 

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https://www.gov.uk/government/speeches/the-autumn-statement-2022-speech

There are two particular items of interest in the Chancellor’s Autumn Statement:

  • Electricity Generation Levy
  • Vehicle Excise Duty for EVs

Electricity Generation Levy

This is intended to act as a windfall tax on non-gas generators who are benefitting from sky high electricity prices, whilst many continue to receive obscene subsidies.  As regular readers will know, I have been highlighting this costly and unacceptable anomaly since the start of the year.

I have copied below the key parts of the government’s technical note:

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https://www.gov.uk/government/publications/electricity-generator-levy-technical-note

The last two clauses appear to close the loophole where a generator sells its electricity at low prices to its parent company or others within its group, who therefore end up making the windfall. I have previously written about how Oersted UK sells its power to its Danish parent company in this way.

But in my view, this Levy does not go far enough:

  • The Benchmark Price of £75/MWh is far too high. Historically market prices been running at around £50/MWh
  • The Levy only charges 45% of the windfall “Exceptional Generation Receipts”. I am not aware of any reason why it should not be charged at 100%. We need to remember that, whereas the oil and gas sector is high risk with high prices often offsetting bad years, the renewable sector is heavily subsidised and consequently largely protected from market fluctuations.
  • The expected revenue from the Levy is £2.8bn a year. However the cost of ROC subsidies alone is projected to run at £7.4 billion a year over the same period. As a minimum, the Levy should aim to cover this cost.
  • A rough calculations shows that a resetting of the Benchmark Price would increase revenue by £1 billion a year. On top of that, a doubling of the Levy to 90% would bring total revenue to £7.6 billion a year.

EV Taxation

The Autumn Statement says:

 

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Although the VED decision is welcome, (I assume EVs will now pay as much as equivalent petrol cars), it does not go far enough.

If half of all new car sales really are electric by 2025, something I find absurd, the loss of fuel duty will be crippling for the Treasury.

On average drivers pay about £1000 a year in Fuel Duty (incl the associated VAT). If the OBR are right, one million EVs will be sold in 2025, which alone will reduce tax revenue by  £1 billion. With EVs already on the road, and more to be sold in the next two years, the government will be staring at lost revenue of maybe £3 billion by 2025, a number which of course will remorselessly increase.

This is not only unaffordable, it is grossly unfair to other taxpayers.

45 Comments
  1. Derek Wood permalink
    November 18, 2022 11:54 am

    There is a much simpler way to reduce the cost of gas, and therefore reduce the cost of electricity generated by gas: Abandon Net Zero, and start fracking! The planet needs all the CO2 it can get!

    • In The Real World permalink
      November 18, 2022 12:59 pm

      Reducing the cost of gas by fracking would be a very sensible way to go , but sensible is not what the Green Loonies want .

      The price of gas generation had been running at about £25 per MWh for many years up until 2021 when changes in the ETS , [carbon taxes ] , more than doubled that figure . https://www.netzerowatch.com/content/uploads/2022/09/fixing-energy-cost-crisis.pdf
      The Russian invasion happened over 1 year later , but was a ” very convenient ” excuse for the politicians / media to hide the real reason for the huge increases in energy costs .
      The ETS is also a very clever way to hide the huge costs of unreliable generation as the carbon credits disguise the subsidies and allow them to say that its costs less than it really does .
      Real figures for wind/solar are about twice the cost of nuclear , and about 4 to 5 times the cost of gas power .

    • Chaswarnertoo permalink
      November 18, 2022 5:28 pm

      You and your logic and facts!

    • Realist permalink
      November 18, 2022 6:10 pm

      Same goes for transport fuels. Drastically reduce, ideally scrap all taxes on petrol and diesel. Those taxes don’t get spent on maintaining the roads let alone building the still missing ones anyway.
      >>simpler way to reduce the cost

      • Rowland P permalink
        November 19, 2022 9:49 am

        Slipping under the radar is the increase of 23% on the fuel tax due to come into effect next March. So the Government is not intent on reducing inflation; rather the complete reverse!

  2. magesox permalink
    November 18, 2022 11:56 am

    Spot on analysis as ever Paul.
    One extra nasty surprise for BEV lovers, however, will be the “Luxury” car tax which got introduced a few years ago. As I understand it (I’m sure someone will correct me if I am wrong), any car bought over a £40k retail/brochure price (not what you actually paid) creates a £350 annual surcharge on top of the normal car tax. And, of course, 40 grand doesn’t buy you too much of a Tesla. Ouch! Virtue-signalling just got more expensive.

    • Chris Phillips permalink
      November 18, 2022 1:17 pm

      I’m not sure, but I think the Govt intends to introduce a different tax regime for EVs, which will not include the over 40k “luxury” tax currently imposed on ICE vehicles. Anyone driving an ICE vehicle (except if they’re travelling to a JSO protest) is viewed by the eco-zeolots as some sort of morally degenerate sinner, so they deserve all they get!

      • AlanD permalink
        November 18, 2022 2:40 pm

        The Budget small print clarifies that in 2025 the ev VED will be at the lower rate (£20?), and subsequently at the standard rate (£165). As for the luxury surcharge, this is £355 and applies in years 2-6. It WILL apply to ev cars.

  3. November 18, 2022 11:58 am

    Small mercies, but the EV virtue signallers won’t be as subsidised as much now they will have to pay the VED. But why wait until 2025??

    • November 18, 2022 12:18 pm

      EV levies are not going to worry buyers thereof until the affordability is very much more attractive to more people; even then, VED does not seem to concern owners of FF fuelled cars except for people who are on their beam ends. It might become more “moot” when the FF vehicles can no longer be viably maintained for whatever reason, but that might be a longer way off than 2025 onwards. May not VED inevitably have to rise because of the reduction in FD? It might all pale into insignificance compared with the devastating rise in tax to pay for subsidies to the energy sector for the massive hike in energy infrastructure expenditure – that these NZ0 nutters don’t really want people to know too much about….?
      Always thought a tourist tax and foreign LGV/HGV toll for access to all UK Roads is a no brainer, but if the NZ0/globalist “vaccine ID” nutters succeed in shutting down travel, might not work entirely. Perhaps a digital tourist tax is needed for people, who access webcams of the places they would have travelled to, might bridge the gap…

    • magesox permalink
      November 18, 2022 1:44 pm

      After the next election. The cadre of CINOs now in total power delude themselves that if they delay bad news / extra taxes until after the next GE, people will still vote for them. Dream on.

  4. David Coe permalink
    November 18, 2022 12:13 pm

    “Half of all new vehicles will be electric by 2025.” I wonder what percentage of those vehicles will be company purchases. With the cost of energy, mortgages and general cost of living increases, I doubt that too many people will be contemplating buying any new vehicles in the immediate future, let alone EVs. Sure wouldn’t want to be in the new car sales business at the moment. Second hand ICEs, that’s a different matter. Who would risk buying a second hand EV with the limited battery lifetime?

    • Gamecock permalink
      November 18, 2022 12:49 pm

      Here’s how they will get half by 2025.

      EV sales won’t go up much by 2025. Sales of ICE vehicles will collapse, a staggering blow to UK economy.

      You will not go from 10:90 to 50:50; you will go to 10:10.

      • Chaswarnertoo permalink
        November 18, 2022 5:29 pm

        Yep. You plebs will be on the bus, if you’re lucky.

  5. Gamecock permalink
    November 18, 2022 12:59 pm

    My spidey-sense tells me the solution to bad government is not more government. You can’t expect them to fix their mess. This ‘Autumn Statement’ will DELAY the solution. Tweaking a mess leaves you with a mess, and the BELIEF that they are actually taking effective action.

    “In this present crisis, government is not the solution to our problem; government is the problem.” — Ronaldus Magnus, 1981

  6. Cheshire Red permalink
    November 18, 2022 1:08 pm

    Tying renewables to the highest energy price was a great move wasn’t it?! How did government expect renewables to offer any saving if they removed any chance of lower production costs being passed onto consumers?

    The outright LIE of renewables being 9 times cheaper than gas still hangs around like a very bad smell.

    It will continue to be trotted out by eco-propagandists. It needs putting to the sword with a definitive explanation that’s so simple even a Green party politician can understand it.

    • Micky R permalink
      November 18, 2022 3:05 pm

      ” The outright LIE of renewables being 9 times cheaper than gas still hangs around like a very bad smell.

      It will continue to be trotted out by eco-propagandists. It needs putting to the sword with a definitive explanation that’s so simple even a Green party politician can understand it.”

      In bullet points, how is the 9x claim undermined?

      It was a transient spot price comparison for gas and renewables
      The market price for renewables does not include the cost of back-up
      Putin’s actions have increased the price of gas temporarily
      The West’s sanctions on Russia have increased the price of gas temporarily

      • November 20, 2022 7:00 pm

        Gas prices were rising before the Ukrainian war due to the demand rising for its use to prop up grids with unreliable generation such as wind and solar.

    • Phoenix44 permalink
      November 18, 2022 7:34 pm

      It was only true when gas prices were spiking. They have since fallen by over 50%. Still 3x higher than in 2019, but half what they were when everyone was panicking. There’s now a surplus of gas in ghe UK, with nowhere to put the LNG cargoes, so it wouldn’t be a surprise if prices fell further.

      • It doesn't add up... permalink
        November 18, 2022 9:04 pm

        It was NEVER true. CFD renewables have been getting over £160/MWh, and those on ROCs vastly more because they were starting with market price plus subsidy.

      • Micky R permalink
        November 19, 2022 9:58 am

        ” It was NEVER true. ”

        Never? I need a robust argument to refute the x9 claims. IDAU’s “Never” works for me, but can it be undermined by the believers?

      • Nigel Sherratt permalink
        November 19, 2022 10:03 am

        Spot prices have been negative recently making unreliables ‘eleventy’ times more betterer. https://www.itv.com/news/2022-10-27/natural-gas-prices-dropping-below-zero-wont-affect-energy-bills-expert-says

      • It doesn't add up... permalink
        November 19, 2022 12:18 pm

        We saw negative spot prices for gas recently. I think you will find that when the electricity spot prices were negative the CFDs were still paying out £160/MWh and gas generation was still running, and of course many wind farms were coining curtailment payments or ROCs and REGOs.

        In reality, these claims relate to the CFD strike price in 2012 money for windfarms that were awarded in round 4, and which have yet to be built, due onstream in say 2027. They are not likely to go ahead at the CFD prices even with the indexation added in, with REMA (the planned review of how the electricity market works) offering a convenient way out. So they are based on fiction.

    • In The Real World permalink
      November 19, 2022 1:33 pm

      Micky R , the claim of renewables being cheaper is a total lie .
      The CFD prices for wind power have been adjusted to show a strike price of about £50 per MWh , they then cherry picked a day and time when grid prices were extra high at probably £450 per MWh to get their 9 times cheaper propaganda .

      But non of the new renewable generators signed up for the contracts , and just took the current grid prices , and the older ones carried on at their £160 to £180 price plus subsidies .And as well as that they are given carbon credits by the Government which they sell to fossil fuel generators which are a way of hiding the subsidies .The total subsidies ,[ which are very well hidden ], are in the region of 9 to 10 £ billion . And then there is the extra cost of balancing the grid which is necessary for wind and solar . This is around another £billion.

      And before carbon taxes were changed in 2021 , most gas fired generation was costing around £25 per MWh for many years .https://www.netzerowatch.com/content/uploads/2022/09/fixing-energy-cost-crisis.pdf

      So renewables have never been cheaper , but the real costs of them are much better hidden now .

      • Micky R permalink
        November 19, 2022 4:37 pm

        Thanks for the replies. Possibly too complex for simple bullet points 😦

  7. It doesn't add up... permalink
    November 18, 2022 1:21 pm

    Several points about the windfall tax. Will it catch wind farms who haven’t commenced their CFDs, and will they get any allowance of a commissioning period – unclear? Does it apply to revenue from curtailment – no? Are ROCs and REGOs considered to be taxable revenues – no? Are they going to set an internal transfer price methodology, perhaps based on the consumer price support calculations? How these things are done matters, because it can produce perverse incentives to curtail production. I see nothing to stop integrated company A selling to integrated company B selling to integrated company C selling to integrated company A at conveniently low forward prices, thus establishing a hedged position at a low price outside the scope of the tax. For extra obfuscation, insert banks or other traders in the chains of transactions who can take a small turn for their trouble.

    Of course, it is necessary to note that renewables are subject only to normal rate CT, so the overall rate will be 70% when CT goes to 25%. Oil and gas will pay 75%.

    Drax may find the assumption that their fuel costs haven’t increased a little hard. They have already shut down the CFD funded unit, because the Baseload Market Reference Price gives a £280/MWh tax on revenues, and the margins at its underlying CFD price have likely vanished as wood chips price in line with coal. There is talk of allowing for that.

    I also note there is a de minimis provision of 100GWh a year. That’s an average of 11MW, enough to exempt a 100MW solar farm or a 40MW wind farm. Private troughing is still in vogue. Curtail to stay outside the tax.

    • It doesn't add up... permalink
      November 18, 2022 1:58 pm

      There is of course scope to sell off smaller wind and solar to other businesses who would be tax exempt with the benefit being shared between buyer and selletr and M&A bankers.

  8. Chaswarnertoo permalink
    November 18, 2022 1:40 pm

    Kwasi offered 3 1/2 % growth, compared to minus 7% RECESSION. Are (H) unt and Rishi Rich totally insane?

  9. Realist permalink
    November 18, 2022 2:15 pm

    EVs should never have been exempt from road tax in the first place. In fact they should be paying more given that EVs are heavier than normal petrol and diesel vehicles.

    • Will permalink
      November 18, 2022 6:12 pm

      Good point, in fact all VED should be based on vehicle model kerb weight, with higher rates for heavier vehicles irrespective of fuel type, and should be introduced for all at next VED renewal point – why wait for another 2 years?

  10. MrGrimNasty permalink
    November 18, 2022 2:34 pm

    The VED proposals are covered here. There is a luxury/expensive car penalty included. The fuel duty loss will be offset by increasing it – glossed over in the budget presentation not surprisingly.
    https://www.autoexpress.co.uk/news/359203/autumn-statement-2022-how-will-budget-affect-drivers

  11. It doesn't add up... permalink
    November 18, 2022 2:36 pm

    I wonder whether the £75/MWh level will now become a floor in the market. Still waiting to see what the round 4 CFDs would pay in current terms. With the noises being made about lack of profitability for new wind farms it seems only a matter of time before we get de facto nationalisation. Meanwhile the government should be asking why Thurrock’s solar farms went bankrupt.

  12. liardetg permalink
    November 18, 2022 3:16 pm

    ‘Half of all vehicles will be etc etc ‘. Statement by an ignorant comfortable middle class suburbanite who has not lifted his eyes to look at a road scape populated by thousands upon thousands of vast diesel powered 12 wheel artics which blow the ‘clean air’ and ‘climate tackling’ crap of EVs out of the water. I simply cannot understand Net Zero. Think about the daily rivers of aviation fuel at our airports. Why doesn’t someone call out the Climate Change Committee’s criminal fraud?

    • Phoenix44 permalink
      November 18, 2022 7:43 pm

      Net Zero is dead in the water but this zombie government of fools doesn’t want to admit. The attempt to get us to all go vegetarian (how much did the government give to the supermarkets?) seems to have failed utterly and passenger numbers on Ryanair and easyJet are back to where they were. EVs seem to ge difficult to shift so none of the behavioural changes look at all doable. Meanwhile neither hydrogen nor carbon capture are getting anywhere and better batteries seem you be becoming the new fusion – just give us 10 years…

      The UK has deindustrialised its major emitters so there’s not much to happen there either. If only the Tories would realise what a delusional fantasy Net Zero is, we could avoid all these tax rises and make serious price cuts in many goods and services.

  13. Micky R permalink
    November 18, 2022 3:18 pm

    The “Office for Budget Responsibility” refers to ” … energy-shock-driven smaller economy ” For domestic energy, the shock would have been much smaller with a fleet of coal-fired power stations and a fleet of PWR nuclear power stations, neither of which we have, primarily due to incompetent politicians over the decades.

    The shock would have been even smaller still if the billions of tons of coal beneath our feet and beneath our coastal waters was being exploited, perhaps by gasification.

  14. Curious George permalink
    November 18, 2022 4:15 pm

    The pricing of electricity in the mix of unreliable “renewables” and reliable sources which are forced to run only on demand never made much sense. Are there any studies how to price it right?

  15. David Coe permalink
    November 18, 2022 4:19 pm

    And what about the prop0sed 23% increase in fuel duty, an increase of 12p/litre, or 15p including VAT, that Hunt conveniently “forgot” to mention in his speech?

    • Realist permalink
      November 18, 2022 5:23 pm

      Fuel duty has no legitimate reason to even exist. Same goes for road tax (conveniently renamed to “vehicle excise duty”). Look at the state of the roads. Just where are all those extortionate taxes going? And don’t forget VAT i.e. a tax on a tax.

  16. GeoffB permalink
    November 18, 2022 4:25 pm

    Sunak is a possibly a WEF agent, here is his Wikipedia entry.
    Sunak worked as an analyst for the investment bank Goldman Sachs between 2001 and 2004.[11][21] He then worked for hedge fund management firm the Children’s Investment Fund Management, becoming a partner in September 2006.[22] He left in November 2009[23] to join former colleagues in California at a new hedge fund firm, Theleme Partners, which launched in October 2010 with $700 million under management.[24][25][26] At both hedge funds, his boss was Patrick Degorce.[27]
    The Children’s Investment Fund is Chris Hohn’s “charity” fund, that is believed to fund Extinction Rebellion, Insulate Britain and Just stop Oil.
    So when Truss got the job of PM, Klaus Schwab must have been disappointed, so started the witch hunt to discredit her, and 34 days later back on track.
    How else can you explain Sunak’s reintroducing the fracking ban immediately, signalling to his real boss “Don’t worry we are back on track” and then the refusal to abandon “Net Zero”, in fact promising even more renewable energy. There are two articles on TCW today with a deep analysis.

  17. HotScot permalink
    November 18, 2022 5:12 pm

    “Half of all new vehicles will be electric by 2025.”

    So, as of Jan 1st 2023 EV sales will only take two years to reach over 1m cars.

    I’m looking at leasing my 4th car in August 2023 and it will be petrol because, like 45% of the country, I have no off road parking. That half of all new vehicles will have to come from the 55% of the country with off road parking.

    Access to charging is restricted to a few parking spots in supermarkets and I suspect a few petrol stations, although I can’t recall seeing any.

    It was also found in a survey a year or two ago that company car drivers taking advantage of Hybrid tax breaks largely didn’t bother to plug their car in, they just drove on ICE power.

    The sales staff in a local dealership agreed with me that either the 2030 date will have to be put back or abandoned because none of this nonsense is realistic.

    • Chaswarnertoo permalink
      November 18, 2022 5:32 pm

      Scottie. Totally realistic because the plebs will not be allowed cars of any sort.

  18. Phoenix44 permalink
    November 18, 2022 7:52 pm

    It’s quite frightening how quickly even well-developed economies can unravel once they reach a certain point. We are in real danger of a doom spiral where we stay in recession but keep taxing ourselves more and more and loading businesses – and thus the consumer – with higher and higher prices via insane, self-defeating policies such as Net Zero. We remain addicted to a high cost, high tax, high spending economy but without growth and cheap energy, that is not sustainable. What emerges from the wreakage is anybody’s guess.

    • Rowland P permalink
      November 19, 2022 9:54 am

      “Taxing a country into prosperity is like standing in a bucket then trying to lift yourself by the handle”. Winston Churchill

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