Election Mode – is it time for "brave decisions” ?

One thing is clear from the last few days of headlines - the gloves are off and the Conservatives want to force green issues onto the election agenda.

With Parliament now on its second “summer” break for the conference season, deep within Number 10 the starting gun for the next election has been fired, expect more of these messages this week – in advance of the Conservative Party Conference, which starts this Sunday.

The next election battle lines are being drawn – and the energy sector is set to be at the centre of the debate.

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The surprise Conservative by-election win in Uxbridge has changed the political landscape – the Tories have learned that opposing the green agenda can influence elections, especially when there's a direct link to local issues (the ULEZ in the case of Uxbridge).

Yet this is not a wholesale rejection of Net Zero, the text from the PM’s speech makes clear he is walking a fine line – maintaining the rhetoric regarding Net Zero, while providing some red meat to those in his party clamouring for the whole agenda to be ditched.

The PM has not said he will move to repeal the legislative frameworks which support the net zero target – Carbon Budgets (which predate the Theresa May era 2050 target), perhaps aware of the arguments this may unleash in both houses. But, as a result of last weeks’ announcements, any Government will find meeting these challenging targets more difficult. This challenge is what sits behind some of the straw men that Rishi blew down during his speech – taxes on meat, seven bins per household, and forcing car-sharing were all ideas for how the carbon budgets might be met – they were not policies of any of the main political parties.

Number 10 has subsequently confirmed that the supply side push on EVs remains – the Zero Emissions Vehicle mandate is still coming into force next year; which imposes fines on car manufacturers that do not supply an increasing percentage of their vehicles with electric (or hydrogen) powertrains.

While I was in Government, some of the hardest meetings with ministers were when they were confronted by some of the difficult decisions that need to be made in the not-too-distant future.

While the PM made a virtue of wanting to “change the way our politics works” he too has taken the easy way out, by pushing back on some of the necessary targets.

Grant Shapps (current Defence Secretary, previously both Transport and Energy Secretary) emphasised this weekend that this Government has successfully met all the past carbon budgets – but that misses the point – the budgets were designed to reduce emissions over time – a task which gets harder with each budget period – Carbon Budget 5 and 6 (the period from 2028 to 2037) will require more significant change in the economy – the low hanging fruit have already been plucked.

The future of road pricing is a ￡40bn sized difficult question. If you accept (as the PM insists he does) that EVs are the future – and that the shift to electric propulsion is a necessary one. It is a short logical argument to consider how the country will replace the revenue that flows to HMRC from every petrol pump and car in the land. The current taxes on fuel and the cars themselves, bring in some ￡40bn a year in revenue. The next Chancellor will still need all the tax income they can get. So where will the missing money come from? Either new taxes on new things or higher taxes on existing things (higher electricity taxes?). Neither will sit well with a public that is currently being taxed higher than any other period in modern history.

Another key decision awaits the next Energy Secretary of State – should we plan for the obsolescence of our current gas networks, how to begin to map out the steps such a transition would need? The Conservatives have “long grassed” this decision too, until well after the next election.

The hard truths of our shared energy future do need to be discussed; Rishi Sunak is right – but by relaxing the deadlines and targets that were the way markers on that journey – he’s just made the transition more difficult, and more expensive, for the next generation of politicians.

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We are advising clients in many of the areas covered above - to discuss the topics raised in this article – do get in touch with Grant Thornton’s Net Zero Team.