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Autumn Statement: Electric vehicle transition receives £2bn boost

Chancellor offers financial support for automotive sector and planning reforms to enable new energy infrastructure

23 November 2023
Chancellor Jeremy Hunt delivers the Autumn Statement 2023 (UK Parliament)
Chancellor Jeremy Hunt delivers the Autumn Statement 2023 (UK Parliament)
 

The electric vehicle sector emerged as a major beneficiary of UK government investment in this year’s Autumn Statement. Chancellor Jeremy Hunt earmarked £2bn for building electric cars in the UK in his latest update on the country’s finances to the House of Commons .

The chancellor promised planning reforms to accelerate chargepoint infrastructure, speed up grid connections for clean energy and support for sustainable aviation.
Hunt’s Autumn Statement set out the government’s tax and spending plans ahead of what is set to be an election year.

The chancellor said his plan contains 110 measures aimed at boosting economic growth. The main emphasis of the statement was on measures that seek to encourage businesses to invest in the UK, which reward work, such as reducing National Insurance (NI) contributions, and a commitment to protect ‘triple lock’ on pensions.

The chancellor presented his Autumn Statement as being focussed on boosting investment and rewarding work. He proclaimed: “Mr Speaker, the best universities, the cleverest scientists and the smartest entrepreneurs have given us Europe’s most innovative economy. We can be the most prosperous too.”

The £2bn investment in EVs and energy sits within a £4.5bn manufacturing pot announced by Hunt, will be made available to support the manufacturing, supply chain and development of zero-emission vehicles.

In parallel, the National Planning Policy Framework will be changed to prioritise EV chargepoint construction, and in addition, the sustainable aviation sector was further accelerated with a £975m sum to develop low and zero carbon technology.

A further £960m is due to be provided for clean energy manufacturing initiatives. Also in terms of energy, there has been an acceptance of the Winser Review’s recommendations to improve grid connections.

In the automotive space the government is also extending to 2030 a £150m programme researching self-driving vehicles, with pilot schemes operating across the country.

In terms of other expenditure, the Autumn Statement reaffirmed commitments made last autumn to provide £14.1bn for the NHS and adult social care in England, as well as an extra £2bn for schools, in both 2023-24 and 2024-25.

The devolved governments in Scotland, Wales and Northern Ireland will get equivalent funding. Defence spending will remain at 2% of national income, which is a NATO commitment. Overseas aid spending was kept at 0.5% of national income, below the official 0.7% target.

In a sign that the chancellor did not want to be seen tapping consumers’ pockets the chancellor did little to affect change to the cost motoring. Hunt announced a 5p per litre cut for 12 months in March and as fuel duty was not mentioned, duty remains at 52.95p per litre for petrol and diesel.

The chancellor’s speech can be found by clicking here

Autumn Statement: Key policies

Chancellor Jeremy Hunt presented his Autumn Statement as being focussed on boosting investment and rewarding work. He proclaimed: “Mr Speaker, the best universities, the cleverest scientists and the smartest entrepreneurs have given us Europe’s most innovative economy. We can be the most prosperous too.”

Key themes in the speech included:

Electric vehicles and energy

Chancellor Jeremy Hunt said he had worked with business and trade secretary Kemi Badenock and energy security secretary Claire Coutinho to make £4.5bn available over the five years to 2030 to attract investment into strategic sectors. This includes support of £2bn for zero-emission investments in the automotive sector; £975m for aerospace; and £520m for life sciences.

The chancellor unveiled a number of supply-side measures and funding packages designed to benefit businesses and local communities.

There will be £960m earmarked for the Green Industries Growth Accelerator to support clean energy, with a focus on offshore wind, electricity networks, nuclear, hydrogen, and carbon capture, usage and storage (CCUS).

Hunt said: “These targeted investments will ensure the UK remains competitive in sectors where we are already leaders and innovative in areas where we are not. Taken together across our fastest-growing innovation sectors, this support alone will attract an estimated £2bn of additional investment every year over the next decade.”

The chancellor said he wanted to make it easier to create a better electricity grid. The government has published its response to the Winser Review and Connections Action Plan, which will cut grid access times for larger projects by half and halve the time to build major grid upgrades.

“It is taking too long for clean energy businesses to access the electricity grid,” said Hunt. “So, after talking to businesses such as National Grid, Octopus Energy and SSE, we publish our full response to the Winser review and Connections Action Plan. These measures will cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure. Taken together these planning and grid reforms are estimated to accelerate around £90bn of additional business investment over the next 10 years.”

Investment zones

Three advanced manufacturing Investment Zones will be established in Greater Manchester, East Midlands, and West Midlands. The Investment Zones programme and freeport tax reliefs will be extended from five years to 10 years, and a £150m Investment Opportunity Fund will support Investment Zones and Freeports to secure specific business investment opportunities.

Four new devolution deals across England have been agreed via Mayoral deals with Greater Lincolnshire and Hull and East Yorkshire, and non-mayoral deals with Lancashire and Cornwall.

There will be £500m of funding over the next two years to help establish two more Compute innovation centres, supporting the development of artificial intelligence (AI) as a growth opportunity for Britain.

The life sciences will receive £20m to speed up the development of new dementia treatments as part of the government’s response to the O’Shaughnessy Review of commercial clinical trials in the UK.

To prioritise overseas investment in the UK, the government has accepted in principle the headline recommendations of Lord Harrington’s review into increasing foreign direct investment. This includes additional resource for the Office for Investment, allowing it to deepen its concierge offer to investors.

Speeding up the planning process

The chancellor said it takes too long to approve infrastructure projects and business planning applications. He claimed that many businesses say they would be willing to pay more if they knew their application would be approved faster.

Hunt will be working with the communities secretary Michael Gove to reform the planning system to allow local authorities to recover the full costs of major business planning applications in return for being required to meet guaranteed faster timelines. If they fail, fees will be refunded automatically with the application being processed free of charge.

Helping business

The chancellor presented a series of measures designed to encourage business to invest in the UK. Businesses will benefit from the introduction of permanent Full Expensing: Invest for Less for those investing in IT equipment, plant, and machinery. A company can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments, meaning that for every pound invested its taxes are cut by up to 25p.

A business rates support package worth £4.3bn over the next five years will help high streets and small businesses. This includes a roll-over of 75% Retail, Hospitality and Leisure Relief for 230,000 properties and a freeze to the small business multiplier.

Hunt promised that SMEs will be supported with tougher regulation on late payers to improve prompt payments, the expansion of Made Smarter in Great Britain and continued funding for Help to Grow.

The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, simplifying the system and boosting innovation in the UK.

The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.

The Climate Change Agreement Scheme will be extended, giving energy intensive businesses like steel, ceramics and breweries around £300m of tax relief every year until 2033 to encourage investment in energy efficiency and support the net zero transition.

Work and benefits

The chancellor said government plans to reward work via a cut in National Insurance and reforms to taxes for the self-employed. A new Back to Work Plan for those with long-term health conditions, disabilities and difficulties finding employment, which includes tougher sanctions for those who can work but choose not to.

The government is reforming the Work Capability Assessment with the aim of supporting people who can work via the welfare system.

From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers. For the first time this will include 21- and 22-year-olds. The government will also increase the National Minimum Wage rates for young people and apprentices: for people aged 18-20 by 14.8% to £8.60 an hour, for 16-17 year olds and apprentices by 21.2% to £6.40 an hour.

There will be extra help for programmes such as NHS Talking Therapies, Individual Placement and Support, Restart and Universal Support.

The government is also exploring reforms of the fit note process to provide individuals whose health affects their ability to work with easy and rapid access to specialised work and health support. Mandatory work placements are proposed for those who have not found a job after 18 months of intensive support. Those who choose not to engage with the work search process for six months will have their claims closed and benefits stopped.
 

Autumn Statement: Responses

The OBR's view

With the NHS, education and defence spending ringfenced, what funding is available for other activities such as transport will need to stretch further as inflation is eating away at spending power. The Independent Office for Budget Responsibility (OBR) says higher inflation will have an impact on the real value of departmental budgets.

The OBR said: “The economy has proved more resilient to the shocks of the pandemic and energy crisis than we anticipated. But inflation has also been more persistent and interest rates higher than in March. Higher inflation boosts tax revenues but also welfare benefits while higher interest rates push up debt servicing. But because departmental spending is left largely unchanged, this delivers a net fiscal windfall of £27bn. The chancellor spends virtually all of this on a 2p cut in NICs, permanent tax relief for business investment, and further welfare reforms, leaving debt falling by a narrow margin in five years.”

Political reactions

Labour criticised the plans, saying a 2% National Insurance cut would not compensate for tax rises already put in place by the government. Shadow chancellor Rachel Reeves said: “I think we can forgive taxpayers for not celebrating when they see the truth behind today’s announcements. The fact is that taxes will be higher at the next election than they were at the last,” she said.

The Liberal Democrats said Britain was suffering from the biggest reduction in living standards since the 1950s and called the Autumn Statement “a big deception”.

What the thinktanks think

Public policy thinktanks raised concerns about a squeeze on local government funding. The Institute for Fiscal Studies (IFS) said while higher inflation had pushed up tax revenue, department budgets would not automatically adjust. Paul Johnson, IFS director, said: “These tax cuts have been ‘paid for’, in effect, by a bigger squeeze on the real-terms value of public service budgets and an even bigger squeeze on public investment, which is frozen in cash terms. There’s a material risk that those plans prove undeliverable and today’s tax cuts will not prove to be sustainable.”

Carys Roberts, IPPR executive director, said: “The Autumn Statement made some welcome policy choices, such as finally raising local housing allowance and going ahead with planned uprating of benefits. But with the OBR now expecting inflation and interest rates to be higher, and growth lower, than in March, we needed to see bolder steps to help people with the cost of living and to turn the UK’s faltering economy around.

“Most concerningly, the chancellor claimed to be making long-term decisions, but his actions prove otherwise. The UK sorely needs investment – in schools, homes, hospitals, and in net-zero industries of the future. But the chancellor announced real-terms cuts to public investment, which will hold back economic prosperity, and he chose to cut taxes which will suck money out of public services. This is despite the public favouring higher rather than lower taxes and spending. Many of his most consequential plans are put off to the next parliament, when we could have a different chancellor altogether. 

“For all the talk of a long-term strategy this was a short-term approach, with giveaways today but the costs borne by the country in the future.”

The Resolution Foundation thinktank estimated that despite the reduction in NI contributions, by the end of the 2020s the average household will be paying £4,300 more in tax than they were in 2019. Torsten Bell, the Resolution Foundation chief executive, said: “The truth is taxes are up not down. Today’s cuts are dwarfed by tax rises already under way. Worse, the giveaways announced today are funded by handing whoever wins the next election implausibly large spending cuts. Tax cuts to boost business investment are welcome, but undermined by plans to cut public investment by over a third – it’s hard to think of a more anti-growth policy.”

The transport sector responds

Sarah McMonagle, Cycling UK’s director of external affairs, said: “The chancellor claimed he wanted to give people more opportunities, boost the economy and help the workforce. A sure-fire way of doing that would have been to increase funding for walking and cycling to give people more transport choices, which he failed to do.

“Every pound invested in cycling and walking makes our streets safer, more pleasant places and more profitable with a return on investment of nearly six pounds. This Autumn Statement was said to benefit business and employees but has done nothing to give those people sustainable transport opportunities, whether they’re taking public transport, cycling or walking.”

The Urban Transport Group welcomed signs that decision-making on transport will be further devolved. “The Autumn Statement offers recognition that deeper devolution enables better transport outcomes for local communities, and we welcome the government’s continued commitment. Empowering local leaders on transport decision-making and funding is a key means of driving economic growth.”

The Confederation of Passenger Transport, the trade association for the bus and coach sector, said it was “good news” for buses and coaches. CPT’s chief executive Graham Vidler said: “The government now needs to ensure a significant proportion of this funding is invested in delivering greater battery ranges for buses and coaches and a sustainable model for hydrogen fuel cells, to accelerate the bus and coach sectors’ transition to zero-emission.”

Boosting electric vehicles

Motoring groups welcomed the news of the £2bn investment into EV sector, although the AA said it would still like to see further moves in the Spring Budget.

Mike Hawes, chief executive of the Society of Motor Manufacturers & Traders (SMMT), said: “Last Friday’s announcement of £2bn for zero-emission advanced automotive manufacturing was an unequivocal vote of confidence in the sector. The chancellor’s statement today, with its focus on business growth, responds to our industry’s need for measures that allow UK automotive to compete for investment. The attractiveness of the UK will be bolstered by permanent full expensing and, given the importance of decarbonising the market and manufacturing, speeding up grid access.

“The UK proposition is enhanced by these measures but it is equally important that they can be accessed. The implementation of the Harrington Review on foreign direct investment must help simplify and speed up the process. We now look forward to the government’s advanced manufacturing plan, its battery strategy and how it will support consumers in making the switch to zero-emission motoring as we must not only make these vehicles locally but sell them.”

The energy sector’s view

Ofgem’s chief executive Jonathan Brearley welcomed the Connections Action Plan (CAP), which aims to accelerate wind, solar and battery power generation connecting to the electricity grid – critical to meeting demand for renewable energy to hit the UK’s 2050 net zero target. Ofgem also welcomed the government’s Transmission Acceleration Action Plan, which set out a programme to halve the time to build new transmission infrastructure, down from current average timelines of 12 and 14 years.

The West Midlands gigafactory site is included in the region’s investment zone. Cllr Jim O’Boyle, cabinet member for jobs, regeneration and climate change at Coventry City Council said: “Our site is a prime location offering future investors an all-in-one solution for battery manufacturing, research, industrialisation and recycling. Today’s announcement delivers significant additional tax incentives and breaks, making the site even more attractive for future investors.
“The West Midlands Gigafactory, the UK centre of electrification in Coventry, is the only available site in the UK with planning permission in place for a large-scale battery production facility with capacity for up to 60GWh per annum – enough to power 600,000 electric vehicles. It is perfectly placed as a pioneering centre of excellence for battery technology and manufacturing, located at the heart of the UK’s manufacturing industry.”

Local government reaction

Organisations representing local government admitted they were disappointed with the Autumn Statement.

The Association of Directors of Environment, Economy, Planning & Transport (ADEPT) was not impressed. ADEPT president Anthony Payne said: “The Autumn Statement is disappointing for public services. While we welcome the announcement of the Round 3 Levelling Up funding announced on Monday and increased support for housing and devolution, we need to understand the details behind other elements, such as the nutrient mitigation scheme and changes to planning.

“Many local authorities have reached the end of the line when it comes to their capacity to absorb spending cuts without impacting on essential services. The public and the most vulnerable in our communities can see that many of the services they rely on just aren’t working. All the innovation and new practices we introduce are no longer enough to bridge the gap between resource and delivery.

“Local government works in partnership with national government. We are responsible for maintaining and delivering infrastructure, local roads, recycling and waste services on which each and every one of us and our families depend; as well as delivering regeneration and economic growth thereby increasing prosperity. We work with government to ensure national priorities are delivered locally and we will continue to deliver for the communities we serve, but there is no hiding the fact we are under intense pressure and the continuing impact on services will be felt by everyone.”

Local Government Association (LGA) chair Shaun Davies was also downbeat, saying: ““The evidence of the financial strain on councils has been growing and it is hugely disappointing that today’s Autumn Statement has failed to provide funding needed to protect the services the people in our communities rely on every day.

“Councils have worked hard to find efficiencies and reduce costs, but the easy savings have long since gone. It is wrong that our residents now face further cuts to services as well as the prospect of council tax rises next year, with councils having the difficult choice about raising bills to bring in desperately needed funding.

“Devolution gives local leaders greater freedom to take decisions closest to the people they represent. Where they are supported by all councils it is good to see new devolution deals announced today, including to those parts of the country outside cities. This needs to signal a genuine ‘local first’ approach to policy making across Whitehall, to ensure as many communities as possible benefit from devolution, including the removal of burdensome negotiations and top-down imposition of new structures.

“National economic growth can ultimately only be achieved if every local economy is firing on all cylinders. Only with the right powers and adequate long-term funding which allows councils to plan properly, can we play a lead role in unlocking the labour market, building new affordable homes, creating jobs, plugging skills gaps and delivering on other key government priorities.”

The UK100 group of local leaders for net zero and clean air welcomed the changes to decision-making. Christopher Hammond, chief executive of UK100, said: “Local leaders will be pleased that the beauty parade of local government funding is receding with the local funding simplification doctrine coming into force in January 2024. It is something UK100 and our members have been calling for years. This is a step in the right direction, but we have a long way to go in empowering our regions from one of the most centralised states in the Western world.”

The logistics sector

David Wells OBE, Logistics UK’s chief executive, said: “The decision to make the current full expensing allowance for capital permanent is a welcome step that will support logistics businesses with long-term planning and investment. Our members are keen to identify if this change will include the cost of acquiring leased or hired vehicles, as well as those purchased outright. In addition, detail is needed to identify whether the move will cover the cost of installing the infrastructure required to help the industry decarbonise, as our research shows this could amount to an outlay of up to £1m per site – a prohibitive charge which will hinder the industry’s shift to net zero.”

News that the planning system is to be streamlined has also been welcomed by the business group, which has been pressing for changes to be made to enable logistics businesses to plan more efficiently for some time. “Since our industry supplies every sector of the economy, it is vital that logistics is included as part of the overall planning process, not as a bolt-on afterthought. We will continue to press government to keep us at the heart of decision-making when it comes to business investment and development.”

Logistics UK said it is is seeking seek detail on how plans for Investment Zones and Freeports are to be implemented, as well as on ways the industry can be assisted on the route to decarbonisation. “The devil of today’s announcement will be in the detail,” said Wells. “While there are indications that the statement could boost economic activity, our members are concerned about how Freeports and Investment Zones could work for them. In addition, businesses still need clarity on the support government will be providing for the transition to a net zero economy, and we will be working closely with them in the coming weeks to ensure the best possible outcomes to keep the UK trading, both domestically and internationally.”

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