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Going Dutch?

Updated: May 8, 2023

The UK's response to the Energy Crunch, compared with those of former partners

The UK's upcoming Autumn Statement may not be billed as a full-scale budget, but it will be a milestone for the incoming Sunak administration as it seeks to distance itself from the short-lived Team Truss and in particular that disastrous mini-budget. New Chancellor Jeremy Hunt can anticipate intense scrutiny of his first major policy statement, especially around the topic of energy policy. How does the UK stack up against its former EU partners? Can we expect Mr Hunt to crib any good ideas?

In a Europe whose energy suppliers are largely in the private sector, the range of options turns out rather limited. We can discount attention-getting stunts like Italy's decision to turn down the heating in public swimming pools. That leaves policymakers just a handful of practical measures. On the supplier side, governments can cap energy prices or tax energy companies. On the consumer side, they can deliver payouts, cut VAT, or seek to modify consumer behaviour.

Supply and demand

As you'd expect on a democratic continent, consumer payouts are universal. Most of them look pretty much like the ones announced in the UK, Spain, Norway and The Netherlands have all announced VAT reductions, but they're definitely in the minority.

There are also half-hearted attempts at behaviour modification. Typical example: as well as chilling their swimming pools, Italians are being asked to turn down thermostats by one degree.

How about the supplier side? Price caps appear to be the preferred mechanism across northern Europe. They've been adopted by Germany, France, Poland, the Netherlands and Norway. The governments of Spain and Italy, meanwhile, have had recourse to windfall taxes. Regardless of your preference, it's evident that the UK is out-of-step in choosing to apply both methods. (Spain, a long-term proponent of windfall taxation, also went belt'n'braces with a gas price cap this summer... but no-one's sure how long that one will last.) A sympathetic commentator would doubtless talk of UK pragmatism.

Sweating the detail

Given this lacklustre set of precedents, it's evident that Mr Hunt is going to have a hard job coming up with major policies that are both effective and distinctive. We'd direct his attention to the detail instead. A few neat little ideas have been doing the rounds. They won't make or break the UK's budget, but they will signal that we're headed in the right direction.

  • UK grid operator National Grid has proposed to make payments to consumers who shift demand out of peak hours. (Nice, but only smartmeter users need apply.)

  • Norway is making some of its consumer payouts in the form of loans, with stipulations about spending on green upgrades. The result should be long-term demand reductions, but the UK government's record on administering green homes schemes is appalling.

  • MPs are demanding the removal of tax breaks for fossil fuel extractors from the Energy (Oil and Gas) Profits Levy Bill that implemented the UK's windfall tax. We'd be anticipating brownie points for Mr Hunt... except that the bill enacts the ideas of one R. Sunak.

What's actually coming down the pipe? We'll have to wait until November 17...


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