FT reports plan is being held up, with officials claiming Chancellor Rishi Sunak ‘doesn’t want to provide any new money’
The government’s much anticipated Energy Security Strategy has reportedly been delayed for a second time, with the Treasury resisting proposals for new spending plans that would help to boost domestic energy generation and curb imports of Russian fossil fuels.
The FT reported this morning that Chancellor Rishi Sunak has forced a delay to the heavily-trailed new strategy, insisting he needs more time “to engage” with it in the wake of last week’s Spring Statement.
The plan – which is intended to set out how the UK can drastically reduce fossil fuel imports in response to the Kremlin’s attempts to weaponise oil and gas supplies and surging international energy prices – had been expected ahead of the Spring Statement, before then being slated for release this week.
However, the FT reported that officials close to the process had now indicated that an announcement would not be made until the week of April 4 at the earliest, meaning the plan could be released during the Easter parliamentary recess.
The delay means the strategy will not appear until weeks after the UK government signalled its intention to end UK oil imports from Russia this year and slash gas imports. It will also come weeks after the European Commission unveiled its own sweeping energy security strategy, pledging to ramp up investment in renewables, energy efficiency measures, and alternative sources of gas.
The FT reported that the latest delay appeared to be largely the result of Treasury concerns over the cost of the new package.
The paper quoted colleagues of Sunak who said he wanted to turn off the spending taps and ensure every “marginal pound” goes towards the tax cuts that he indicated in last week’s Spring Statement could come ahead of the next election.
“He doesn’t want to provide any new money,” another official told the paper.
However, with energy prices soaring, the Kremlin stating that it could block oil and gas exports in response to Western sanctions, and Ukraine’s government repeatedly calling on its allies to extend sanctions to cover the fossil fuel exports that fund Russia’;s war machine, pressure is continuing to mount on the government to come forward with a credible plan to slash oil and gas imports.
Reports have indicated the new strategy could include a range of measures that would not place new spending demands on the Treasury. Speculation is mounting that reforms to planning rules to make it easier to build onshore wind and solar farms, a review of the moratorium on fracking, and new oil and gas exploration licenses in the North Sea could all be included, although each of these moves remain controversial with either parts of the Cabinet or environmental groups.
However, other parts of the mooted plan could require significant new funding.
Business and environmental groups have repeatedly called on the government to drastically increase funding for energy efficiency programmes and move the cost of green levies into general taxation, arguing that such moves would curb energy use and help households in fuel poverty.
Meanwhile, Prime Minister Boris Johnson has repeatedly indicated that he wants to put a major expansion of nuclear power at the heart of the new strategy. But delivering new nuclear power plants is likely to require the government to take some form of stake in new projects through complex new financing arrangements.
Separately, the BBC reported today that the government does plan to take a 20 per cent stake in the planned new nuclear plant at Sizewell, with French developer EDF also taking a 20 per cent stake. Ministers reportedly hope the confirmation of two cornerstone investors could encourage infrastructure investors and pension funds to take up the remaining 60 per cent stake.
The move would represent a major boost to plans for new nuclear development in the UK, but there is no indication as yet as to whether the government would similarly support further projects, such as the proposed new plant at Wylfa in North Wales.
In addition, Johnson last week told Parliament the new strategy would “address the needs of British steel, British ceramics and the whole of British industry” indicating that further support for energy intensive businesses struggling with soaring energy costs could be on the cards.
The FT today reported that bosses from some of the UK’s heaviest industrial energy are calling on the Chancellor extend a support scheme that is scheduled to lapse at the end of this month that helps energy intensive industries cope with carbon costs that have risen sharply over the past year.
In addition, green business groups campaigners have argued that if the new strategy is to include plans to boost domestic gas production then it should also feature long-awaited clarification on how the government plans to accelerate hydrogen and carbon capture and storage development.
According to various reports over the weekend, Number 10 is increasingly frustrated that Sunak is blocking crucial spending plans on multiple fronts following a Spring Statement that did little to tackle either the energy security or cost of living crises beyond moves to scrap VAT on clean technologies and cut fuel duty.
Meanwhile, environmental groups are likely to fiercely opposed any attempt by the new strategy to ramp up domestic oil and gas production, with a new report yesterday arguing that plans to approve six new North Sea drilling sites would “blow” the UK’s carbon budgets and jeopardise its net zero goals.
Given the paucity of new measures in last week’s Spring Statement, the Energy Security Strategy increasingly looks like the primary mechanism for tackling the worsening energy security, cost of living, and climate crises the UK is facing. But with Treasury orthodixy remaining as entreched as ever businesses will have to keep on waiting to see if the plan lives up to its considerable promise.