Autumn statement must show UK is open for business
Amid the uncertainty around Brexit, the government must use the Autumn Statement as an opportunity to build confidence among business. In energy and climate change, this means making key policy decisions to support investment, says CBI Infrastructure Director, Rhian Kelly
With a new Prime Minister, and the UK heading out of the EU, the party conference season was guaranteed to spark debate, and it did not disappoint. The EU referendum has created well-documented uncertainty, not least for those operating in the energy and climate change space. The government now needs to get on and work with business to ensure that firms can continue to invest and support growth in a period that may have some turbulence.
The Prime Minister’s vision of a fairer society, articulated at Conservative Party Conference, with more inclusive growth underpinned by good business and great jobs is surely the right thing. Firms I speak to want to play their part. What we need is a new partnership between government and business, as the bedrock of a new economy.
The next major step in this process will be the Autumn Statement at the end of the month, which is widely expected to be a major reset of economic policy in light of Brexit. With considerable changes to energy policy over the last year, it is important for industry that whatever is said at the Despatch Box provides a long-term and stable policy environment. The Autumn Statement must encourage investment to help allay uncertainty elsewhere and substantiate the Government’s commitment to the UK being “open for business” post-referendum. The confirmation that Hinkley Point C will go ahead certainly helped with this message, and it is crucial that momentum is maintained beyond the big-ticket projects.
To this end, there are near-term decisions that Government can take to build confidence. This should start with setting out the timing for the next Contracts for Difference auction. Investors would also benefit from greater clarity around the level of funding available to low-carbon projects through the Levy Control Framework beyond 2020. While clarity on the long-term trajectory of the UK’s carbon price would also be welcome, it is made more challenging in light of Brexit, given the interrelation between the UK’s Carbon Price Support and the EU Emissions Trading System. As such, business would want to see the post-2020 CPS freeze maintained, while government continues a close dialogue with industry in order to forge a clear long-term carbon price trajectory that can provide the right signal for low-carbon investors, while maintaining the competitiveness of the UK’s industrial base.
The government can also use the Autumn Statement to help stimulate investment in energy efficiency among business, which continues to play a crucial role in managing costs and improving productivity. This includes using Business Rates to drive investment by exempting new plant and machinery from calculations, eventually looking to phase out all productive and environmental assets. Furthermore, mechanisms such as Enhanced Capital Allowances can be amended to ensure that larger and more complex energy efficiency projects can qualify.
The coming months will be critical for the UK’s economy as the process of Brexit becomes clearer, while the new year will see the publication of the government’s Emissions Reduction Plan to meet the 5th Carbon Budget. The government must use the opportunity of the Autumn Statement to support investment which will drive economic growth now, while setting us up to succeed in our long-term low-carbon transition.
You can read the CBI’s full submission to the chancellor here.