The UK’s first female chancellor of the exchequer has delivered her first Budget since taking office on 4 July.
While much of Rachel Reeves’ first Budget was either broadly in line with expectations, or had been announced early, a move criticised by the deputy speaker of the house, there were some new announcements and significant surprises.
Fuel duty and the windfall tax
In a surprise to many, Reeves announced that the government would not be scrapping the 5p fuel duty cut, instead freezing fuel duty for a full year. The government notes that this is a tax cut worth around £3 billion that is expected to save the average driver around £60 each year.
Much less surprising is the confirmation of a previous announcement that the Energy Profits Levy (EPL), otherwise known as the windfall tax, would be increasing. The EPL was originally instituted in 2022 following the immense profit growth of oil and gas firms during the energy crisis, pushing oil and gas firms to pay a 25% tax on “exceptional profits”. This was later increased to 35% in January 2023, and Reeves has now formally confirmed it will rise to 38%, with the scheme extended to March 2030. The 29% investment allowance will be removed, while the 100% first year allowance and the decarbonisation allowance will be maintained.
EV incentives and the automotive industry
Reeves noted that the government wants to support uptake of electric vehicles (EVs) and thus will maintain existing incentives for EVs in company car tax. While vehicle tax will apply to zero emissions cars and vehicles from April 2025, the differential between the rate paid on fully electric and other vehicles will be increased, a measure expected to raise £400 million over the next five years.
Over the next two years, £2 billion in investment funding will be given to the automotive manufacturing sector, a move which Reeves says is intended to boost growth in the EV sector.
While not mentioned by Reeves in her speech to Commons, the full Budget document confirmed that the government will invest over £200 million in 2025-2026 to accelerate the rollout of EV chargepoints, while also providing £120 million over this time period to support the purchase of new electric vans and support the manufacture of wheelchair accessible EVs.
Green hydrogen, CCUS, floating wind, and GB Energy
The chancellor confirmed that £125 million would be made immediately available for GB Energy to set up in its recently announced headquarters of Aberdeen, with an £8.3 billion spend previously confirmed for the duration of the Labour government. A previously announced and controversial plan to invest in carbon capture, utilisation and storage (CCUS) was also confirmed, with £3.9 billion of funding confirmed for 2025-2026. Additionally, funding for 11 new green hydrogen projects was also revealed, spread across industrial areas of England, Scotland, and Wales.
The budget also allocated £134 million to support the development of port infrastructure to help facilitate floating offshore wind.
The Warm Homes Plan has formally been allocated £3.4 billion over the next three years to support heat decarbonisation and household energy efficiency. This includes a a major funding uptick for the Boiler Upgrade Scheme, as well as a boost to the heat pump manufacturing sector.
