The UK Growth Plan 2022 and the Energy Bill Relief Scheme

On 21^st and 23^rd September 2022, the UK government announced a new Energy Bill Relief Scheme (EBRS) and the Growth Plan 2022. Below you will find more detailed information about these announcements that may be of interest.  

Visit SCVO’s Running Costs Crisis hub to find more information, news and updates from us on the cost of living and running costs crisis.  

What these announcements mean for the voluntary sector 

The main impact on voluntary organisations will come from the Energy Bill Relief Scheme. While it is welcome that the UK Government is supporting voluntary organisations alongside businesses and public sector organisations, the exact impact of this measure is difficult to quantify without a detailed understanding of whether/when organisations fixed their energy bills. We also await further detail of support for organisations that rely on off-grid energy. 

The measures announced in the Growth Plan will indirectly impact the voluntary sector, primarily through their impact on individuals and families, or as they apply to the causes that voluntary organisations champion. The continuation of Gift Aid tax relief at 20% will be welcomed by voluntary organisations that fundraise in this way.  

It is also worth noting that not all measures announced by the UK Government will apply to Scotland. The Deputy First Minister, John Swinney, has confirmed that the Scottish Government would not replicate tax cuts. We expect the emergency budget review from the Scottish Government in the week of Monday, 24 October, to consider the implications of the UK Government's announcements. 

Objective of the Growth Plan  

The Growth Plan 2022 ‘makes growth the government’s central economic mission, setting a target of reaching a 2.5% trend rate. The intention is that sustainable growth will lead to higher wages, greater opportunities and provide sustainable funding for public services. To do this, the UK Government must cut taxes, streamline the public sector, and liberate the private sector, by making Britain the place for:   

• investment: creating the right conditions and removing barriers to the flow of private capital – whether taxes or regulation   
• skilled employment: helping the unemployed into work and those in jobs secure better paid work   
• infrastructure: accelerating the construction of vital infrastructure projects by liberalising the planning system and streamlining consultation and approval requirements   

• home ownership: getting the housing market moving • enterprise: cutting red tape and freeing business to grow and invest’.  

Despite being referred to as a ‘mini- budget’ or ‘fiscal review’, the Growth Plan was not officially a budget. Office for Budget Responsibility (OBR) forecasts were not published alongside it. However, we expect the UK Government to publish an updated analysis from the OBR alongside its Medium-Term Fiscal Plan on 23 November.  

Regarding measures that are not UK-wide, the UK Government notes that: 

‘…funding for the devolved administrations will be determined through the normal operation of the Barnett formula and Block Grant Adjustments. It is for the devolved administrations to decide how to spend any additional funding on priorities in Scotland, Wales and Northern Ireland’.  

It is our understanding that the Scottish Government is expecting to receive about £600m extra funding as a result of the announcement.  

The UK Government also explains that: 

‘…for some policies, such as Investment Zones, full details on implementation are yet to be determined meaning that it is not possible to publish a costing at this stage. Such policies will be included in the public finances at a future OBR forecast, once there is sufficient certainty about their implementation’.  

The UK Government will deliver Investment Zones in partnership with the Scottish Government and local partners in Scotland. SCVO will seek full details on how this will impact voluntary organisations. 

Impact on charities 

There are very few direct mentions of the voluntary sector in the Growth Plan itself:  

• Introduction: ‘The government has committed to a new six-month Energy Bill Relief Scheme for businesses and other non-domestic energy users, including charities and public sector organisations, providing them with a discount on energy prices.’  
• Section 2.6: ‘The Energy Bill Relief Scheme (EBRS) is a temporary six-month scheme in Great Britain that will protect businesses and other non-domestic energy users, including charities and public sector organisations, from rising energy bills this winter by providing a discount on wholesale gas and electricity prices.’ 

Below, we outline some of measures which will apply directly to voluntary organisations and some with a more indirect impact (please note that a large part of the wording below is taken directly from the UK Government Growth Plan 2022 available here, and from the Energy Bill Relief Scheme which can be found here).  

Direct impacts on voluntary organisations 

Energy Bills Relief Scheme 

• The new Energy Bills Relief Scheme will see energy prices for non-domestic energy customers such as businesses, charities and public sector organisations cut, and will reduce wholesale energy costs.  
• This support is in addition to the Energy Price Guarantee for households.  
• It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed/out of contract, variable and flexible tariffs and contracts.   

• It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.  
• As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support.  
• To administer support, the UK Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity.  
• This is equivalent to the wholesale element of the Energy Price Guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.  
• The level of price reduction for each business will vary depending on their contract type and circumstances:  

• Non-domestic customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022. Customers entering new fixed price contracts after 1 October 2022 will receive support on the same basis.  
• Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases.   
• UK Government is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the UK Government’s Energy Bill Relief Scheme support.  
• For organisations on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the Maximum Discount.  

• If organisations are not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly and SCVO will share this information as soon as it is available.  

• The UK Government will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023 - the review will focus in particular on identifying the most vulnerable non-domestic customers and how the Government will continue assisting them with energy costs. SCVO is working with colleagues across the UK to ensure that the needs of voluntary organisations feature heavily in this review. 

Gift Aid 

• There will be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth more than £300m. 

Levelling Up (England only, details in Scotland are to be confirmed) 

• New Investment Zones will provide time-limited tax reliefs, and planning liberalisation to support employment, investment, and home ownership. The Department for Levelling Up, Housing and Communities will shortly set out more detail on the planning offer. This will include detail on the level of deregulation and the streamlined mechanism for securing planning permission. The government will deliver Investment Zones in Scotland, Wales and Northern Ireland and intends to work in partnership with the devolved administrations and local partners to achieve this.  

• The UK Government will legislate for powers to create tax and development sites in Investment Zones where powers are reserved. The UK Government remains committed to the progress of the Freeports programme. The UK Government will work with local partners involved in current and prospective Freeports to consider whether and how the Investment Zones offer can help to support their objectives, as part of the wider process for identifying Investment Zones. This will ensure that both programmes complement one another.  
• The UK Government has invested in local growth through a wide range of competitions and grants but recognises that the sheer number of different funds has become onerous for some councils to navigate and deliver. Over the next two years, the UK Government will streamline these, reducing inefficiency and bureaucracy, and giving local government the flexibility it needs to deliver for local economies.  
• See The Growth Plan 2022: Factsheet on Investment Zones for more details.   

Indirect impacts on voluntary organisations 

Net Zero 

• The North Sea Transition Authority will launch a new oil and gas licensing round.  
• The UK Government has asked the Rt Hon. Chris Skidmore MP to chair an independent review into how to deliver our net zero commitment while maximising economic growth and investment, supporting energy security, and minimising the costs borne by businesses and consumers. The Chair will report by the end of 2022. 

Trade Unions 

• The UK Government will introduce legislation that will ensure Minimum Service Levels can be put in place for transport services so that industrial action doesn’t make it impossible to get to and from work, and to make it easier to settle industrial disputes by ensuring meaningful employer pay offers are put to employees.  

Income Tax 

• The Growth Plan brings forward the planned cut to the basic rate of income tax to April 2023, and abolishes the additional rate of income tax completely, simplifying the tax system and making the UK more competitive. The government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned. This is a tax cut of over £5 billion a year that allows workers, savers and pensioners to keep more of their income, with an average gain of £170 in 2023-2024. This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK; and the default basic rate which applies to non-savings and non-dividend income of any taxpayer that is not subject to either the main rates or the Scottish rates of income tax.  
• There will be one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%. 
• The additional rate of income tax will also be removed from April 2023. This will apply to the additional rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland. The additional rate for savings, dividends and the default additional rate will also be removed from April 2023, and this change will apply UK-wide. This will improve the competitiveness of the UK tax system, encourage entrepreneurship and support growth. Where rates are devolved in Scotland, the Scottish Government will receive funding through the agreed fiscal framework to allocate as they see fit.  

• See The Growth Plan 2022: Factsheet on Income Tax for more details  

National Insurances (NICS) and Health & Social Care Levy  

• The UK Government is reducing NICs rates by 1.25 percentage points from November and cancelling the Health and Social Care Levy coming in from April 2023.  

• See The Growth Plan 2022: Factsheet on Cancellation of National Insurance Rise and Health & Social Care Levy for more details  

Payroll 

• The UK Government will also repeal the complex changes to off-payroll working, allowing ‘businesses to get on with business.’   
• The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.  

Pensions 

• The Growth Plan will bring forward draft regulations to reform the pensions regulatory charge cap, giving defined contribution pension schemes the clarity and flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers. 

Tax simplification  

• Tax simplification will be embedded at the heart of the tax system as a core HM Treasury and HMRC priority. The government will therefore abolish the Office of Tax Simplification and set a mandate to HM Treasury and HMRC to focus on simplifying the tax code.  

Energy Markets Financing Scheme  

• The new Energy Markets Financing Scheme, delivered with the Bank of England, will help to reduce disruption to the UK’s wholesale gas and electricity market. The £40 billion scheme will help to address extraordinary liquidity requirements faced by energy firms from high and volatile energy prices. The scheme will provide a backstop source of additional liquidity to energy firms in otherwise sound financial health to meet extraordinary variation margin calls. It will be limited to those making a material contribution to the liquidity of UK energy markets and who are thereby systematically important to the UK economy. A new Energy Supply Taskforce will seek to negotiate long-term agreements with major gas producers.  
• To make homes cheaper to heat, the UK Government will bring forward legislation to implement new obligations on energy suppliers to help hundreds of thousands of their customers take action to reduce their energy bills, delivering an average saving of around £200 a year. This help will be worth £1 billion over the next three years, starting from April 2023. Support will be targeted at those most vulnerable, but will also be available for the least efficient homes in lower council tax bands. As with previous schemes, the UK Government will work with the Scottish Government on arrangements in Scotland.  

Employment  

• The Growth Plan announces measures to get more people back into work which, together with the agenda to boost productivity, will drive higher employment, wages and economic growth. The UK Government will raise the Administrative Earnings Threshold to bring more claimants who are in work and on low earnings into a more intensive conditionality regime and provide more work coach support. The government will also strengthen the sanctions regime to set clear work expectations of claimants and provide more support to those over 50. These changes will give claimants the best possible chance to be financially independent of UC.   

• The UK government will be strengthening the sanctions regime to set clear work expectations – including applying for jobs, attending interviews or increasing the hours – in return for receiving UC. Claimants who do not fulfil their job-search commitment without good reason could have their benefits reduced. These changes will apply across Great Britain.  

• Expansion of DWP 50+ offer – To help older workers to find work, the government will provide additional work coach support to new, eligible over 50s claimants and – for the first time – to over 50s that are long-term unemployed. This will mean more jobseekers across Great Britain receive intensive, tailored support at jobcentres to help them get into and progress in work, boosting their earnings ahead of retirement.   
• The UK Government is committed to ensuring the immigration system works for business and encourages highly skilled people and high growth businesses to choose to locate and invest in the UK. This has included the introduction of Global Talent, High Potential Individual, Scaleup Worker and Global Business Mobility visa routes. The government will set out a plan in the coming weeks to ensure the immigration system supports growth whilst maintaining control.  

Digital 

• Later this year, the UK Government will set out its plans on how it will further support digital rollout to drive growth. The Growth Plan also sets out the infrastructure projects that the government will prioritise for acceleration, across transport, energy and digital infrastructure. 

Alcohol Duty Review 

• The UK Government is today publishing its response to the Alcohol Duty Review consultation launched at Autumn Budget 2021, alongside the draft legislation for consideration. The reforms will improve the current system by making it simpler, more economically rational, and less administratively burdensome on businesses. The reforms will be implemented from 1 August 2023. The UK Government is also freezing the alcohol duty rates from 1 February 2023 to provide additional support to the sector.  

Useful further analysis of the Growth Plan’s impact  

Following the publication of the Growth Plan 2022, you may also be interested to read further analysis about its impact, some of which can be found below:  

• Richard Sagar, Charity Finance Group’s Head of Policy, takes a look at the new Chancellor's mini-budget statement and what it means for charities  
• ProBono Economics outline how Growth Plan benefits for wealthiest mean Philanthropy Champion 'more important than ever'  
• Institute for Fiscal Studies comment on how announcements were published without a semblance of an effort to make the public finance numbers add up 

• The Resolution Foundation comments on how the Chancellor has blown the budget  
• Peter Kelly, Poverty Alliance’s Director, says the Chancellor’s mini-budget embodied the economic policies that have helped create the social and economic injustice that exists today  
• Alison Garnham, Chief Executive of Child Poverty Action Group (CPAG), refers to the statement as being for the 1 per cent, saying more about bankers’ bonuses than helping hungry kids.   
• One Parent Families Scotland responds to the UK ‘inequality budget’ 

Impact on Scottish Budget 

Prior to the Growth Plan announcement, Scottish Government and other devolved administrations asked for a windfall tax, not higher borrowing to fund cap on energy prices. They also called for additional funding to support services as devolved settlements are worth considerably less in real terms than last October when they were set. Their letter mentions the voluntary sector:  

‘In addition to households, early clarity and additional support is also required for businesses and the third sector, who are facing substantial challenges. The current measures provide businesses with only a temporary respite and little certainty to help them plan for the future. Many organisations would be forced to close if they are not supported.’ 

Regarding measures that are not UK-wide, the UK Government notes that: 

‘…funding for the devolved administrations will be determined through the normal operation of the Barnett formula and Block Grant Adjustments. It is for the devolved administrations to decide how to spend any additional funding on priorities in Scotland, Wales and Northern Ireland’.  

It is our understanding that the Scottish Government is expected to receive about £600m extra funding as a result of the announcement. The Scottish Government will now need to decide how to respond to the Growth Plan.  

The Scottish Government has already published a response to the announcement. John Swinney argues that: 

‘the Chancellor’s statement today will provide cold comfort to the millions of people across Scotland who have been looking for the UK Government to use its reserved powers to provide support for those that need it most. Instead we get tax cuts for the rich and little for those who need it most’. 

We understand that the emergency budget review from the Scottish Government will be published in the week of Monday 24^th October. 

Useful further analysis on the impact on Scotland  

• The Fraser of Allander Institute published their analysis of the Growth Plan presenting some options now available to the Scottish Government. 
• SPICe also published a blog considering the impact on Scotland. 

What’s next? 

• The Scottish Emergency Budget will take place in the week of Monday 24^th October (exact date TBC). 
• A UK Government’s Medium-term Fiscal Plan along with OBR forecast will be published on 23^rd November 2022. 
• The Scottish Budget will take place in December 2022 (TBC). 
• A UK Budget will take place in the Spring (with a further OBR forecast). 

Contacts 

Rachel Le Noan 

Policy & Public Affairs Officer, SCVO 

Rachel.lenoan@scvo.scot  

Jason Henderson 

Policy & Public Affairs Officer, SCVO 

Jason.henderson@scvo.scot