Will summer budget spell the end for public industry subsidies?

3 min read

News editor

The chancellor is set to deliver the first wholly Conservative budget since 1996, with predictions pointing to a re-think on how renewable energy is funded.

The former coalition government may have provided checks and balances on overall Conservative ambitions, but that didn’t stop the PM declaring that he wanted the last administration to be “the greenest government ever”.

How that is interpreted is open to debate. Year-on-year figures from DECC, run by the Lib Dems until May 2015, show that renewables’ share of electricity generation was 22.3 per cent in the first quarter of 2015, up 2.6 per cent compared to Q1 in 2014. Renewable electricity generation stood at 21.1TWh in the first quarter of this year, up 15 per cent on the 18.4TWh in the same period of 2014. More on these figures can be found on the government’s website.

From the comments received regularly at The Engineer, it would seem that the notion of “anthropogenic climate change” itself is often dismissed as fantasy, whilst others present arguments on the overall efficiency of renewable energy solutions, particularly wind turbines. Then there is the question of cost, and who should bear the brunt of spending on projects that are designed to help keep the lights on and contribute to carbon reduction targets.

Now the Tories have full control at Westminster, the gloves are off and by June 2015 the new government had announced an end to public subsidies for onshore wind farms from April 1, 2016, with exceptions made for projects that had met certain milestones such as the receipt of planning permission, plus securing land rights and a grid connection.

As Amber Rudd, the new energy and climate change secretary recently stated, onshore wind remains an important part of Britain’s energy mix with enough subsidised projects in the pipeline to meet Britain’s renewable energy commitments.

“We are committed to cutting our carbon emissions by fostering enterprise, competition, opportunity and growth,” she said in June. “We want to help technologies stand on their own two feet, not encourage a reliance on public subsidies.”

Communities living near proposed onshore wind projects will have the final say on whether they go ahead and this week the chancellor is expected to outline how costs of renewable energy projects – passed on in part to consumers by the energy companies – will be reviewed.

The chancellor used his 2011 budget to call for a “march of the makers” and EEF is calling for a shift from economic recovery into sustainable growth. To do this, EEF says that government should continue with the support of “initiatives on technological innovation, boosting apprenticeships and delivering on major infrastructure programmes, from road improvements to a new runway at Heathrow.”

Specifically, the manufacturers organization has presented these recommendations:

  • Government to set out a roadmap for the development of business taxation to 2020
  • Ensuring a tax system that encourages investment in future productive capacity, including reforming capital allowances to ensure they mirror actual depreciation, restoring buildings investment allowances
  • Extending the Annual Investment Allowance from 1 January 2016 at £250,000, and removing investment in plant and machinery from business rates valuations
  • Protection of the R&D tax credit
  • Continued commitment to the full implementation of the Energy Intensive Industries Package, as agreed by the previous government, and the commencement of discussions for post 2019/20 measures
  • Maintain the pipeline of infrastructure projects already identified in the Road Investment Strategy and local growth deals
  • Enable local authorities to protect local roads spending
  • Maintain spending on skills and training that are of value to business, and stick to the previously announced plan of channelling skills funding though employer-directed vouchers
  • Maintain defence spending at a credible level to protect the international security on which British trade depends
  • Maintain export support, especially for new entrants to growing markets and expand UKEF’s focus beyond supporting individual transactions to provide more campaign-based support that enables companies to grow their businesses in new markets.

In a pre-budget comment, Earl Yardley, director at Industrial Vision Systems has been in touch to state: “The government must ensure that the announcements made at the Summer Budget provide a positive outlook for UK manufacturing. The more investment and tax breaks within this space, the more stability there is for key industries, such as pharma, medical device, and automation, which, in turn, will also enhance the performances of UK engineering firms.

“The chancellor should ensure he fulfils his promise previously set prior to the election that the annual investment allowance (AIA) for capital allowances will be kept at £500,000. We have already seen a significant increase in investment made in new automated production lines and cells across the UK manufacturing base.

“By establishing a long term rate, this would boost productivity and help leverage the UK at the forefront of the global manufacturing sector.”

In other news, this week marks the 75th anniversary of the start of the Battle of Britain, which saw 1,733 Luftwaffe aircraft downed and losses from both sides totalling 1,419. An interesting engineering element to this conflict could be seen in the limitations of Germany’s Me-109, which had a range of 700km and 15 minutes’ fuel over Kent and was at the limit of its range over London. By 1942, and with the battle won, Rolls-Royce had introduced the Merlin 61 supercharged aero-engine, the details of which can be found in our archive. By 1946 military aircraft began to take on a more daunting powertrain in the form of the jet engine, an era brought to life again in our archives.