The Autumn Statement

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.

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November 18, 2022 at 06:03AM

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