The UK Government’s 2026 Budget document runs to well over 150 pages, but Jit wasn’t being unreasonable when he described it as a nothing burger with a gherkin in it. The parts dealing specifically with energy can be found primarily on numbered pages 2 and 3 and run to little more than a page in total, though as will be seen below, there are other sections of relevance to UK energy policy. Verbatim budget sections appear below, followed by my comments.

This Budget represents a shift in the government’s approach to energy. The conflict in the Middle East has put bills up for households and businesses. This Budget provides immediate relief…

Yes, the conflict in the Middle East has put up bills for households and businesses, but the trajectory was determinedly upwards before that conflict commenced, and that was because of the cost of net zero and the absurd determination to “decarbonise” the UK’s electricity grid by 2030. To the extent that the Budget provides immediate relief, it is modest, short-term, funded out of taxation (i.e. robbing Peter to pay Paul) and does nothing to deal with the structural costs issue caused by the government’s energy policy.

…while offering longer-term reform to make sure the energy system works for households and businesses. The government has made substantial progress on clean power. The focus now is to unleash cheap electricity, cutting bills to reindustrialise the country…

The energy system patently does not currently work for households or businesses. Your “ substantial progress on clean power” is what has, in significant part, caused our high electricity prices. You don’t explain how you intend to “unleash cheap electricity” and your plans to reindustrialise the country, laudable though they are, founder on the altar of renewable energy.

The government must be disciplined in managing every aspect of energy costs, while building the assets needed to provide energy security to protect British businesses and households from volatile international gas prices, and to build the grid, which has not kept pace with demand. This Budget is the start of a new energy pathway on which the 10 Year Plan will build. This government will prioritise cheaper energy – to help British businesses to compete, and to provide breathing space for households. Cheaper electricity will boost electrification, increasing the UK’s energy security and helping to decarbonise the whole economy.

Do you have the faintest idea what you’re talking about? Energy security consists of having an energy system that isn’t in constant danger of the lights going out. Building the grid, as you put it, will cost tens, possibly hundreds, of billions of pounds, and is not the way to achieve cheaper electricity – quite the contrary. Why the obsession with decarbonising the economy? That’s not a laudable objective in isolation. It only makes sense if we are faced with a climate crisis, if global action can make the “crisis” go away, and if the rest of the world is achieving the same progress as that achieved by the UK. Patently that isn’t the case.

This Budget will:

Support households with the cost of energy – extending the VAT cut to electricity to July 2027, which is expected to take around £50 off the annual Ofgem price cap in April 2027, and launching a £2.6 billion Household Energy Payment, which will provide a £100 payment directly into bank accounts from January 2027 for households in England in council tax bands A-D, supporting up to 20 million households. Devolved governments will receive their share of this funding via the Barnett formula. To help fund this, the government is temporarily increasing the Bank Corporation Tax Surcharge from 3% to 6% for 15 months from 1 January 2027 to 31 March 2028….

All of which is short-termism, and involves moving money off bills, to hide from the public just how high they are, while taking tax off them to pay for it. The cost hasn’t gone away. The Bank Corporation Tax Surcharge increase, I note, is to help fund it, which rather sounds as though it won’t pay for it in its entirety.

…this Budget kickstarts the long-term action required to get energy costs down for good:

Controlling energy costs – no new policy costs will be put on bills until a comprehensive Cost Control Framework is in place at the spending review in 2027, which will set budgets for components of energy costs, including policy costs.

This sounds good, and even hints at some reality entering the energy debate for the first time in a long time. But new policy costs are to be kept off bills only until the new Framework is in place, which will be next year. You aren’t promising that the new Framework will refrain from adding costs to bills next year.

Prioritising a cheaper energy mix and procuring new generation only where it lowers bills, benefits the system, and can be accommodated by the grid.

What does this mean? Does it mean no new renewable energy contracts will be granted unless they will definitely reduce costs, rather than add to them? Does it mean no new projects will be allowed to go ahead unless grid extensions can cope with them? Are you seriously planning to do something about the rapidly increasing levels of constraints payments? Or is it just words?

Progressing next steps in breaking the grip of gas on bills with a consultation published alongside this Budget on wholesale Contracts for Difference, fixing the price paid to some renewable projects to protect British homes and businesses from volatile gas prices.

This is interesting, and may come back to haunt you, since gas prices may well fall in due course (some analysts expect them to do so). Also, gas prices, by your own admission (see below) now set the price of electricity only 60% of the time, so if you break the link with gas prices, and electricity bills don’t fall as a consequence, you will have to accept the reality that it is the drive to net zero and the associated policy costs that are responsible for high electricity prices.

From 2027 onward, the government will:

Deliver the British Industrial Competitiveness Scheme, meaning 10,000 energy intensive manufacturing firms will get a 20-25% electricity discount, starting in April 2027, including a back payment for 2026-27.

Abolish gas standing charges, coupled with targeted mitigations to ensure this is delivered fairly.

Introduce a new Energy Debt Circuit Breaker to tackle energy debt, saving all billpayers around £30 by 2030.

Reform electricity standing charges – with further details to be announced next year.

Scrap the planned new tax on gas bills (the Gas Shipper Obligation), so that government rather than consumers fund the costs of hydrogen projects.

As with other measures, none of these policies address the underlying problem. Saying that the “ government rather than consumers [will] fund the costs of hydrogen projects” is disingenuous. You mean that we, the public, will continue to pay for them, but through taxation rather than through our gas or electricity bills. You aren’t reducing policy costs, you’re hiding them, in the hope that out of sight is out of mind.

Box 1.B on numbered page 16 contains an intriguing and potentially damaging snippet (damaging to the government):

At 59 parts per thousand, energy has a smaller weight in the UK CPI basket compared with the euro area where it is around 91 parts per thousand. Therefore, a similar change in energy prices will have a smaller direct effect on headline inflation in the UK. The overall energy intensity of the UK economy has fallen from 70% in 2020 to 58% in 2025, reflecting improvements in energy efficiency and changes in the composition of economic activity.

Those last words sound like a euphemism for deindustrialisation.

And on the following page:

Changes in the energy market since 2022 have reduced and delayed the pass through of global energy price shocks into UK inflation. Structural changes have weakened the link between gas and electricity prices, with gas setting the wholesale electricity price around 60% of the time in 2025, down from around 90% in the early 2020s. These changes include the growth in renewable generation, including a higher share of the electricity market being covered by Contracts for Differences.

If gas setting the price is doing so for a reducing amount of time, we have to look elsewhere for the relentless rise in the UK’s electricity prices. Expensive renewables and their multifarious subsidies would seem to be the obvious place to look, especially if something other than gas is setting the price for 40% of the time (and, presumably, that percentage is rising).

Page 38:

2.48 The government is giving families breathing space now, including by extending the cut to VAT on electricity until July 2027, and providing a further £2.6 billion of support through the Household Energy Payment, with up to 20 million households in England receiving a direct £100 payment from January 2027 delivered through the council tax system. To help fund this, the rate of the Bank Corporation Tax Surcharge will temporarily increase from 3% to 6%, from 1 January 2027 until 31 March 2028. This time-limited period will be legislated for in Finance Bill 2026-27 and will not be extended.

That’s repetition, and the same criticism applies as above.

Page 43:

The government has already removed VAT from domestic electricity for this winter….

More repetition.

…Households are understandably worried about energy costs, given the sharp increase in global prices this year. This Budget provides universal support with energy bills by extending the temporary 0% rate of VAT on qualifying domestic electricity supplies in Great Britain for another three months, until July 2027. This extension is expected to take around £50 off the annual Ofgem price cap in April 2027.

Keep saying it. Presumably because there isn’t much else to say. And whatever you do, don’t talk about how much the price cap has risen on this government’s watch.

In addition, the government is launching a £2.6 billion Household Energy Payment to help households with the rising cost of energy. This will be directly provided to up to 20 million households via the Council Tax system, through a £100 payment for households in bands A-D in England from January 2027. The devolved governments will receive their share of funding through the Barnett formula, which will enable them to provide similar support. Taken together, these decisions mean that almost all households in the UK will benefit from the extended VAT cut to electricity, which is expected to take around £50 off the annual Ofgem price cap in April 2027, and around 80% of households in England will gain further from the £100 Household Energy Payment. To help fund this, the rate of the Bank Corporation Tax Surcharge will temporarily increase from 3% to 6%, from 1 January 2027 until 31 March 2028. This time-limited period will be legislated for in the Finance Bill 2026-27.

How many times can you say it? Nothing burger, indeed.

In addition, this Budget provides £100 million additional funding for local authorities in England to provide further targeted support to households acutely impacted by rising energy bills, some of whom are in council tax bands above A-D.

More robbing Peter to pay Paul. More failure to address the underlying issue. More sticking plasters. More moving of deckchairs on the Titanic. We’re still heading towards the iceberg.

Page 45:

This intervention builds on action taken at the last Budget, including taking £150 of costs off bills in April 2026 by scrapping the Energy Company Obligation levy and funding 75% of the Renewables Obligation from the Exchequer.

By the Exchequer, you mean the taxpayer. We’re still paying.

The government is also offering longer-term reforms to make sure energy institutions and markets work for households and businesses. This Budget kickstarts the long-term action required to get energy costs down for good. Household energy debt has almost tripled to over £5 billion (Q2 2026) following Russia’s illegal invasion of Ukraine.

Correlation is not necessarily causation.

The government is publishing a new debt strategy to address this and act as a circuit breaker on energy debt. The strategy is expected to save a typical household almost £30 by 2030, via reforms to prevent debt building up and a one-off targeted debt relief scheme for eligible households.

So those of us who haven’t built up energy debts are paying for those who have?

Chapter 4 sets out further detail on energy bill support for businesses. This includes funding being confirmed at Budget for the British Industrial Competitiveness Scheme (BICS) to cut electricity bills by up to 25% for over 10,000 energy-intensive businesses from April 2027; the introduction of a Cost Control Framework at the spending review in 2027 to set budgets for components of energy costs, including policy costs; and reforms to the energy market which will bring down the cost of energy in the long term.

More on Chapter 4 below.

Page 46: Box 3.A Summary of energy interventions:

Alongside this immediate support, this Budget kickstarts the long-term action required to get energy costs down for good: • Controlling energy costs – no new policy costs will be put on bills until a comprehensive Cost Control Framework is in place at the spending review in 2027, which will set budgets for components of energy costs, including policy costs. • Prioritising a cheaper energy mix and procuring new generation only where it lowers bills, benefits the system, and can be accommodated by the grid. • Progressing next steps in breaking the grip of gas on bills with a consultation published alongside this Budget on wholesale Contracts for Difference, fixing the price paid to some renewable projects, to protect British homes and businesses from volatile gas prices. From 2027 onward, the government will: • Deliver the British Industrial Competitiveness Scheme, meaning 10,000 energy-intensive manufacturing firms will get a 20-25% electricity discount, starting in April 2027, including a back payment for 2026-27.93 • Abolish gas standing charges, coupled with targeted mitigations to ensure this is delivered fairly. • Introduce a new Energy Debt Circuit Breaker to tackle energy debt, saving all billpayers around £30 by 2030.94 • Reform electricity standing charges – with further details to be announced next year. • Scrap the planned new tax on gas bills (the Gas Shipper Obligation), so that government rather than consumers fund the costs of hydrogen projects.

A useful summary of actions that fail to address the underlying problem.

Page 57:

At this Budget, the government is taking steps to:

Bring down energy costs for business and support electrification.

An oxymoron?

4.20 The cost of energy is one of the biggest barriers to growth in the UK. In the second half of 2025, household electricity prices in the UK were higher than in all but three EU states. Industrial energy prices for all UK business types are consistently amongst the highest in the EU. The UK is exposed to volatile international fuel markets.

The whole world, and the rest of Europe, is susceptible to volatile international fuel markets. Why are our costs higher than theirs? Could it have anything to do with this?

High electricity costs also make decarbonising the whole economy more difficult.

Well, there’s an irony, given that decarbonising the economy has resulted in high electricity costs.

The government will introduce a new comprehensive Cost Control Framework (CCF) at the spending review in 2027 that will set budgets for components of energy costs, including policy costs, to ensure government action drives bills down over the next 10 years. Until that CCF is in place, no further policy costs will be placed on bills unless they bring bills down or are essential for security of supply.

That latter point is a get out of jail at our expense card. Weasel words.

4.22 The Gas Shipper Obligation tax on gas bills will not be introduced as planned, providing savings for businesses and households across the country. Instead, the government will publicly fund Hydrogen Allocation Round 1 contracts and any future hydrogen contracts – for example, Hydrogen Production Plant 1 – if the government commits to them, and subject to value for money.

How will you establish value for money? Either way, we, the taxpayers, will be paying.

4.23 Cheap, clean power benefits billpayers, energy security and decarbonisation. To ensure that the government’s continued commitment to clean power always means cheaper power, the government will ensure that it only procures clean power when it lowers bills overall and can connect to the grid. Allocation Round 8 will lower bills, as well as deliver a good outcome for energy security and climate.

Well, that’s interesting. Allocation Round 8 promises to be interesting, not least to see if these are just words. They probably are. After all, the paragraph refers to “cheap, clean power”, yet renewables are neither cheap nor clean.

4.24 To tackle high energy costs for businesses, the government is delivering one of the most significant interventions in business energy costs in a generation. From April 2027, the British Industrial Competitiveness Scheme will support over 10,000 eligible manufacturers in Great Britain, cutting their electricity bills by up to 25% and bringing electricity costs closer to other economies in Europe.

But this doesn’t address why their bills are higher than those of their competitors. We now have the absurd situation that government policy is making energy expensive, and we that taxpayer have to pay more tax to reduce the bills for some of the worst affected businesses.

4.25 In addition, the main rate of the Climate Change Levy on electricity will be frozen from 1 April 2028. This will help to reduce electricity costs in real terms for businesses. This comes on top of the removal of Carbon Price Support from April 2028, as announced earlier this year. This will simplify the carbon pricing landscape and remove £18/tCO2e on fossil-fuel powered electricity generation, helping to reduce energy bills. This is worth £235 million over the next five years.

That is interesting, representing as it does a first serious hint of recognition that aspects of net zero are driving costs. More significantly, on the quiet, it seems to represent the first tentative step away from net zero.

4.26 To drive down costs, the system must also deliver infrastructure cheaper and faster. As announced by the Prime Minister, Great British Grid will work alongside existing network operators to increase competition and support delivery of grid upgrades and reforms. Competition in offshore electricity networks has delivered hundreds of millions of pounds of bill savings, and building on this success, competition will shortly be introduced into onshore electricity transmission networks.

Where’s the evidence for those bill savings? As for Great British Grid, I have already expressed my views on that here.

4.30 The government will set out further detail on reforming and improving the efficiency of the electricity market in the 10 Year Plan. This will include how siting and investment decisions are made by generators, constraint management, system pricing, and balancing and settlement arrangements, building on the reformed national pricing programme set out earlier this year. These reforms will reduce system costs, make markets work better for consumers, and encourage electrification.

Sounds great. I’ll believe it when I see it.

4.31 The government will review accountability across the energy system – setting clearer expectations for the roles, responsibilities, priorities and outcomes of the National Energy System Operator (NESO), Ofgem and the Department for Energy Security and Net Zero (DESNZ).

That’s also interesting. Will you remove the Net Zero obligations that are imposed on them all? These changes won’t achieve much otherwise.

4.32 The consultation on wholesale Contracts for Difference has been published today to progress the government’s plans to delink electricity from volatile international gas prices. The government intends to consult on Market Arrangements for Gas, with further details to be announced in due course. Further reforms to the Contracts for Difference scheme will be delivered before the opening of Allocation Round 9.

I have commented above regarding the question of gas setting the price of electricity. Further reforms to CfD before AR9 would be interesting, but only if they are meaningful reforms that cease to have the effect of subsidising (mostly foreign) renewable energy companies.

4.33 As the UK transitions to clean power, net zero and to support the country’s energy security, the government is clear that oil and gas will remain a part of our energy mix for decades to come. Therefore, the government is continuing to take a pragmatic approach to the North Sea – providing stability, supporting jobs and ensuring the sector continues to make a significant contribution to the UK economy.

That’s about the first sensible thing I’ve read so far. But then you go and spoli it by saying something stupid…:

4.34 Established within the National Wealth Fund (NWF), the Energy Wealth Fund (EWF) will invest in renewable and low-carbon energy infrastructure across the UK, helping to unlock growth and supporting the low-carbon economy. To support this, £2 billion for the EWF will be provided to the NWF. The EWF will be linked to the government’s future revenues from the North Sea, ensuring investment in the energy transition.

4.35 The government is legislating for the Oil and Gas Revenue Levy in Finance Bill 2026-27 to ensure it is ready to take effect immediately after the Energy Profits Levy ends, which will be 1 April 2030 or earlier if the price floor is triggered. This legislation will provide the oil and gas sector with the certainty and predictability it needs to keep investing in the North Sea, while ensuring it pays its fair share of tax on excess revenues in times of unusually high oil and gas prices in future.

It is to be hoped that this doesn’t deter investment. Will you impose a similar levy on the excess profits made by subsidised foreign renewable energy companies?

4.36 DESNZ is reprioritising its budget to contribute towards the Defence Investment Plan. The government is prioritising delivery of mature carbon capture, usage and storage (CCUS) and hydrogen projects at the Teesside, Merseyside and North Wales clusters, maintaining grant funding for the Viking cluster while exploring progressing projects in development through private investment and government loan or equity investments, subject to approval. This will save £200 million capital grant from CCUS and £500 million from hydrogen. The government will also save £1 billion capital grant from the Warm Homes Plan (WHP). The government remains committed to heat pump deployment and will maintain the Boiler Upgrade Scheme at current funding levels of £400 million in 2027-28 and rising broadly in line with inflation thereafter. The government has also launched the Warm Homes Loan Scheme to support heat pump and clean technology uptake. The majority of WHP funding for low-income households and social housing, delivered by mayors and councils, is protected. After a £200 million saving, Great British Energy (GBE) and GBE-N retain £8.3 billion across the spending review period.

CCUS? Seriously? For pity’s sake…..

4.37 The government is actively looking at how loan or equity investments can support the continued development of future CCUS and hydrogen projects this Parliament, including for the Acorn Cluster, while ensuring a return on any investment for taxpayers. Subject to value for money and affordability, up to £300 million may be available for strategically important hydrogen projects. Projects in the Second Hydrogen Allocation Round will also shortly be progressed to the Invite to Offer stage, with funding to be considered as part of the next spending review.

It’s significant that this waste of money isn’t qualified by reference to reducing bills, value for money, etc. HAR is eye-poppingly expensive.

Page 67 et seq:

Reindustrialisation is central to the government’s plan to build a stronger, fairer, and more resilient economy…. Prioritising lower energy costs: businesses are held back by slow grid connections and energy costs. This Budget puts the UK on a different path, enabling more businesses in more places to grow.

It’s all very well talking about the desirability of reindustrialisation, and the fact that if this is to be achieved, lower energy costs must be prioritised. Addressing the fundamental reason behind those high energy costs offers the only hope – short-term subsidies to help businesses abate the worst effects of those high costs is no long-term answer.

Page 131:

6.204 Cost of public electric vehicle (EV) charging – The government is publishing the response to the cost of public EV charging review, and announcing (i) the tariff porting taskforce and (ii) funding to reduce the cost of local, lower powered public chargers across Great Britain.

6.205 VAT on public electric vehicle charging – The government will introduce legislation in Finance Bill 2026-27 to clarify that electricity supplied through publicly accessible, and workplace electric vehicle charging points is subject to 20% VAT and is not considered domestic use for the Climate Change Levy. The legislation will take effect from 1 November 2026. 6.208 Carbon Price Support – The government will end Carbon Price Support rates in Great Britain from April 2028.

So poor people who don’t have access to domestic chargers with cheaper rates will have to pay more to charge EVs. And you expect them to swap their ICE vehicles for EVs, do you?

6.209 Climate Change Levy rates 2028-29 – The main rates of Climate Change Levy for electricity and liquified petroleum gas will be frozen from April 2028, at 2027-28 levels. The main rates for gas and solid fuels for 2028-29 will be uprated in line with RPI.

So much for reducing costs to businesses to help them compete.

6.210 Temporary VAT zero-rate on electricity –The temporary 0% VAT rate for domestic electricity (six months from 1 October 2026) will be extended for a further three months, to 1 July 2027. This is expected to apply UK-wide from April 2027.

Why not end on a forlorn note of repetition?

Conclusion

I would like to be more positive about the budget. I would like to be able to say that it is a curate’s egg – that is that it is good in parts. But, so far as concerns energy policy, it isn’t. The best that can be said for it is that despite the rhetoric, there do seem to be the first suggestions that it’s dawning on the supposed grown-ups in the government that net zero and “clean” renewable energy, the mad dash to decarbonise the national grid by 2030, and all the associated policy costs, are having a negative effect. A penny seems to be dropping that this is all very expensive, and potentially a vote-loser. A pebble has been dropped into the net zero pond to see which way the ripples spread. Time will tell if all this is a precursor to a mature reappraisal of the UK’s energy policy or if – as seems to be our new Prime Minister’s wont – it represents no more than minor tinkering around the edges.

Postscript

It may count for little, but it’s worth noting that apart from references to the Climate Change Levy, the words “climate change” appaear together only once in the entire document (page 143: “the Green Financing Programme has raised more than £51.0 billion for expenditures
that tackle climate change, rebuild natural ecosystems and support jobs in green
sectors.“). Perhaps the ground is shifting within the government after all.