Emergency Budget 2015: What Does the Future Hold for Business Energy?
All eyes were on London on Wednesday as the first Chancellor of the Exchequer of a Conservative majority government in nearly 20 years stood up to deliver an emergency Budget, a mere four months after the last one. Top priorities for this Budget were rumoured to include pension reforms, welfare cuts, and employment, but there was another issue at the forefront of many people’s minds; the subject of energy and bills, particularly for SMEs.
As predicted, the Budget caused a storm of controversy in many areas. Although SME owners will be pleased by the announcement that corporation tax will be cut in 2017 to 19%, with a further cut to 18% by the year 2020, which will certainly help businesses to save money, there was a small statement about the abolishment of the Climate Change Levy, hidden away that will have a profound knock-on effect for business energy bills.
Under the current laws, if a business chooses an energy tariff where 100% of the electricity supplied comes from renewable sources, then they will not have to pay the Climate Change Levy (CCL). However, the announcement made by the Chancellor will remove this exemption, meaning that all businesses, regardless of whether or not their tariff supplies electricity from renewables, will have to pay CCL for the electricity they use. The first stages of this new change will become effective from the 31st July 2015, with an intermittent rollout commencing on the 1st August, allowing time for electricity generated prior to the change to be distributed with the CCL intact.
The decision has been widely criticised, both by green businesses and climate change campaigners, who believe that the removal of the Climate Change Levy will now do nothing to encourage businesses to source green energy. In addition, those businesses who have made an effort to switch to green sources in a time of rising energy prices will be disappointed that their endeavours will still result in additional charges. With the high business gas and electricity prices faced by many SME owners, the lack of plans put in place to cut bills no doubt left many disappointed, with some expressing their concerns on Twitter.
NB. Almost nothing at all on energy and climate #budget2015— Jonathan Reynolds MP (@jreynoldsMP) July 8, 2015
Millions paying too much
The lack of any mention of energy was all the more galling thanks to an announcement earlier this week by the Competition and Markets Authority (CMA), which discovered, after a year-long investigation, that millions of business and domestic energy customers up and down the country were paying far more than necessary for their energy. According to their study, the average UK household will spend £1,200 on energy alone each year, with the findings showing that electricity prices had seen a hike of 75% in ten years, while gas prices had increased by 125% during the same period.
Following the findings of their report, the CMA have confirmed that they will be putting forward a number of measures in order to help businesses find better energy deals for themselves. An example of these measures will include the prevention of energy contracts being automatically renewed once they reach an end. It is expected that these proposals and final recommendations will be released before the end of 2015.
The future of business energy
Many will no doubt be wondering how the Conservative government plans to follow through on their election promises, if their emergency Budget fails to mention energy prices. In their manifesto, the Conservatives pledged to “keep your bills as low as possible and promote competition in the energy market”, along with numerous other commitments that involved the production of reliable energy and money saving initiatives. However, it seems that there is still work to do in the energy industry before these promises can be fulfilled.
Further to their findings, the report by the CMA also explored the reasons behind why both business and domestic consumers were paying so much for their energy, and found that a major reason was a lack of awareness of cheaper deals and the considerable lack of transparency surrounding these tariffs. According to the study, dual fuel customers (those who get both their gas and electricity from the same supplier) would save an average of £160 per year just by switching through a business energy comparison site. They found that 70% of people were on a “default” standard rate, with reasons for a lack of switching including “lack of awareness of what deals are available, confusing and inaccurate bills and the real and perceived difficulties of changing suppliers”.
Despite the lack of energy talk during the Budget, a document was released on the Gov website detailing the government’s future budgetary plans, which included comments on the CMA’s findings. In response to the report, the government reaffirmed plans to move towards a 24-hour switching process by the end of 2018. Although the move will not be instantaneous, with plans for completion more than three years away, a transition towards making switching easier would certainly increase consumer confidence and trust in the energy industry.
One small light at the tunnel was a promise in the government document to review the business energy efficiency tax landscape and launch a consultation later in the year. The main outcome of this consultation will be to develop a “simple, fair and more efficient energy environment for business” in order for them to grow further. However, the specifics for the consultation have yet to be announced, so only time will tell as to whether it will succeed in saving businesses money on their energy bills.
In the meantime...
While the above does suggest that energy is on the government’s agenda, the lack of comment made on the subject during the emergency Budget indicates that it isn’t necessarily a top priority. We might be wrong, but it didn’t feel like the subject was atop the government's agenda.
Nevertheless, the first step for many businesses will be to figure out if they are one of the millions in the UK paying far too much for their energy. Using our business energy comparison page, you can quickly discover whether there is a cheaper tariff out there for your company. The second step is to identify where you can cut costs even further, just through simple measures that can be introduced throughout the office. Visit our recent blog post for some quick and easy energy saving measures, which include opting for energy-efficient lightbulbs, encouraging staff to switch their computers and plugs off at the end of the day and moving towards a paperless office.
Although the emergency Budget was disappointing for those with a vested interest in energy and climate change, there is still hope that the government’s future plans will include measures that will address the country’s energy bill crisis. Until then, it is up to businesses to ensure that they are fully aware of the money-saving deals out there, and exactly how much they could help.