A change of prime minister does not wipe Whitehall’s slate clean.
Attention has inevitably focused on personnel, but the energy sector is already turning to the status of consultations, investment decisions and regulatory programmes. With no new manifesto to follow, ministerial appointments offer the clearest indication of the new administration’s direction. The appointment of Burnham ally and former Energy Consumers Minister Miatta Fahnbulleh therefore provides an important clue as to what stays, what changes and what goes.
The machinery that will keep moving
A large part of the energy agenda is already too advanced, institutionally embedded or commercially important to reopen.
That includes the system-planning architecture being built around Reformed National Pricing and the Strategic Spatial Energy Plan; regulatory processes such as RIIO-3 and ED3; delivery of flagship programmes including the Warm Homes Plan; and Allocation Round 8 of the Contracts for Difference scheme.
These programmes involve statutory timetables, committed investment and extensive industry planning. Fahnbulleh also returns to a department she already knows, reducing the likelihood of a prolonged reset. The emphasis may change, but disrupting these programmes would weaken the investment certainty needed to deliver clean power.
The same direction, but a different emphasis
Other policies are likely to survive while being reframed around Burnham’s priorities.
Energy-cost rebalancing is an obvious area to watch. Any further action would build on the previous Government’s decision to move 75 per cent of domestic Renewables Obligation costs into general taxation. Burnham was subsequently reported to be considering further transfers of policy costs from electricity bills into taxation, while Fahnbulleh has previously acknowledged the imbalance between electricity and gas prices.
The CBI and Energy UK are now calling for Renewables Obligation and Feed-in Tariff costs to be removed from business bills, alongside the electricity element of the Climate Change Levy. Neither has committed to these proposals, but they align with the Government’s wider emphasis on reindustrialisation and regional growth.
The Energy Independence Bill is also likely to survive, although publication may be delayed while the new team takes stock. Its focus on renewables, grids, consumer protection and a managed transition remain aligned with the Government’s priorities. North Sea policy is likely to face greater scrutiny over whether industry commitments produce UK renewable investment and replacement jobs.
Where a genuine reset is possible
The clearest scope for a more fundamental rethink is how government responds to persistently high household energy bills.
In one of its first acts, the Government moved swiftly to remove VAT from domestic electricity from October. The decision will provide immediate relief and modestly narrow the tax imbalance between electricity and gas. However, it does not address standing charges, wider system costs or the underlying structure of the retail market.
More fundamental reform therefore remains possible. Burnham’s team has reportedly considered an Affordable Energy Guarantee, under which households would receive a discounted rate for a basic allowance of energy, with further consumption charged at the normal rate. The model is closely related to proposals developed by the New Economics Foundation during Fahnbulleh’s leadership.
The design would matter enormously. Without carefully calibrated allowances, a tariff based mainly on consumption could penalise households with electric heating, electric vehicles or higher unavoidable energy needs, cutting across the wider push to electrify heat and transport.
Burnham has also promised greater public control of essential services, raising the prospect of energy networks being brought into public ownership. However, the system is already heavily directed by the state: NESO oversees system planning, Ofgem determines much of how networks and suppliers operate, and government contracts shape investment in generation. In practice, greater public control could therefore involve stronger strategic direction and regulation, as well as potential changes to network ownership, rather than wholesale nationalisation of the energy system. Given the significant fiscal and practical implications, however, any major change to network ownership is more likely to be a second-term priority.
His devolution agenda could also give mayors and combined authorities a greater role in aligning energy infrastructure with local housing, transport and industrial priorities. However, regional plans would need to integrate closely with NESO’s spatial energy planning and the national planning framework to avoid adding another layer of fragmented decision-making.
A greater role for Great British Energy and the National Wealth Fund also appears likely, using public capital to develop projects and de-risk investment while continuing to mobilise private finance.
Much of the energy agenda will therefore survive. The real question is how it will be reweighted, policy by policy rather than through one grand reset.
