Cut net-zero subsidies by £1.6bn: calculation note

Central fiscal result

-£0.8bn - Net fiscal impact in 2028-29

Low case: -£1.6bn. High case: +£1.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model £1.6bn green-subsidy saving as high-delivery case.
• Central case assumes £0.8bn removable by 2028-29.
• Baseline uses current energy and environmental receipts context.
• Excludes wider carbon-tax repeal and ZEV mandate changes.

Affected population

• Affected population is subsidised firms, households and projects.
• Direct exposure depends on unidentified schemes.
• Indirect exposure includes supply chains and consumers using subsidised technologies.
• Contracted projects may not be cut immediately.

Gross impact

• Party saving claim: £1.6bn.
• Central saving: half claim, £0.8bn.
• High-cost case includes compensation and higher future support costs.
• Private-investment loss is described, not fiscal-scored.

Fiscal build-up, central case

• Cancelled subsidy spending: -£1.0bn
• Contract and transition costs: +£0.1bn
• Higher replacement support: +£0.1bn
• Lost receipts from weaker investment: £0.0bn

Central net impact: -£0.8bn in 2028-29.

Behaviour and pass-through

• Low case assumes most targeted subsidies are discretionary and cancellable.
• Central case assumes some schemes are contracted or already committed.
• High-cost case assumes compensation and future catch-up support exceed near-term savings.
• Private investment may fall more than public saving.
• Consumer-price effects depend on pass-through.

Phasing

• 2026-27: -£0.2bn. Preparation or partial implementation.
• 2027-28: -£0.6bn. Main ramp-up year.
• 2028-29: -£0.8bn. Target-year central estimate.
• 2029-30: -£0.8bn. Continuation at steady-state assumptions.

Main source groups

• Office for Budget Responsibility, "Economic and fiscal outlook: October 2024" (2024): The OBR scores fuel-duty, EPL and environmental-receipts measures and discusses oil-and-gas uncertainty; anchors energy and motoring estimates.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Goulder and Parry, "Instrument Choice in Environmental Policy" (Review of Environmental Economics and Policy, 2008): Instrument choice matters: taxes, permits and standards differ in efficiency and distributional effects; relevant to carbon pricing, CBAM and ZEV mandate choices.
• Dechezlepretre and Sato, "The Impacts of Environmental Regulations on Competitiveness" (Review of Environmental Economics and Policy, 2017): Environmental regulation can impose costs but competitiveness effects are often smaller than claimed; relevant to deregulation claims around net zero and ESG.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.