Move renewables charges to tax: note

Central fiscal result

+£2.1bn - Net fiscal impact in 2028-29

Low case: +£1.5bn. High case: +£3.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models move renewables charges to tax by 2028-29.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£2.1bn in 2028-29.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross programme or delivery cost: +£2.4bn
• Tax and receipt offsets: -£0.2bn
• Administration and evaluation: +£0.1bn
• Behavioural and pass-through effects: -£0.2bn

Central net impact: +£2.1bn in 2028-29.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2026-27: +£0.2bn. Phased implementation and take-up.
• 2027-28: +£1.2bn. Phased implementation and take-up.
• 2028-29: +£2.1bn. Phased implementation and take-up.
• 2029-30: +£2.1bn. Phased implementation and take-up.

Main source groups

• HM Treasury, "Budget 2025 policy costings" (2025): Costings provide scored fiscal impacts for the two-child limit, salary sacrifice and EV mileage charge; used where government costings exist.
• HM Treasury, "Budget 2025" (2025): Budget 2025 sets out implemented welfare, energy, motoring and tax-threshold measures; used for current government delivery policies.
• Kotlikoff and Summers, "Tax Incidence" (Handbook of Public Economics, 1987): The legal payer of a tax is not necessarily the person bearing its economic burden; supports incidence discussion across taxes.
• Metcalf and Stock, "The Macroeconomic Impact of Europe’s Carbon Taxes" (NBER, 2020): European carbon taxes show limited adverse macro effects in studied cases, partly depending on recycling; relevant to output and inflation risk.
• Office for Budget Responsibility, "Economic and fiscal outlook October 2024" (2024): The OBR assessed employer NICs, public investment and Budget-wide output and inflation effects; supports economic-impact and tax-incidence assumptions.
• Labour Party, "Change: Labour Party Manifesto 2024" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.