Scrap net-zero subsidies: calculation note

Central fiscal result

-£3.0bn - Net fiscal impact in 2027-28

Low case: -£12.0bn. High case: +£10.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Renewable subsidies and selected climate schemes are cancelled.
• Domestic fossil-fuel licensing is expanded.
• Existing contract compensation is included in the high case.
• Climate-damage costs are outside the fiscal score.

Affected population

• Affected units are households, energy firms, investors and supply chains.
• Bill-payers may see levy cuts if pass-through occurs.
• Renewables, retrofit and grid sectors face lower demand.
• Fossil-fuel producers may gain licences.

Gross impact

• Reform claimed £30bn annual saving.
• Central fiscal saving is only £3bn after contract and levy caveats.
• Low case saves £12bn if schemes are cancelled.
• High case costs £10bn from compensation and instability.

Fiscal build-up, central case

• Scheme and levy savings: -£8.0bn
• Contract compensation and transition: +£3.0bn
• Replacement energy-security spending: +£2.0bn
• Lost tax and investment effects: +£0.0bn

Central net impact: -£3.0bn in 2027-28.

Behaviour and pass-through

• Low case assumes schemes can be cancelled with limited compensation.
• Central case assumes many costs sit on bills or contracts.
• High case assumes compensation and financing costs exceed savings.
• Short-run bill relief may increase energy demand.

Phasing

• 2026-27: -£1.0bn. Preparation or partial implementation.
• 2027-28: -£3.0bn. Main scenario year.
• 2028-29: -£4.0bn. Behaviour and pass-through develop.
• 2029-30: -£5.0bn. Steady-state uncertainty persists.

Main source groups

• Metcalf and Stock, "The Macroeconomic Impact of Europe's Carbon Taxes" (American Economic Journal: Macroeconomics, 2020): Observed European carbon taxes did not produce large negative macroeconomic effects; weakens the claim that climate policy is mainly an economy-wide drag.
• Stern and review team, "The Economics of Climate Change: The Stern Review" (HM Treasury and Cambridge University Press, 2006): Unpriced climate damages create long-run economic costs that conventional budgets may miss; explains why fiscal savings can come with external-cost risks.
• Ofgem, "Energy price cap explained" (2026): The April-June 2026 cap is £1,641 for a typical dual-fuel direct-debit household; scale check for energy-bill relief.
• Reform UK, "Our Contract with You" (2024): Reform pledges cheaper energy by scrapping net-zero policies, levies and taxes; defines policy direction but not details.
• Andersson, "Carbon Taxes and CO2 Emissions: Sweden as a Case Study" (American Economic Journal: Economic Policy, 2019): Sweden’s carbon tax reduced transport emissions relative to a synthetic-control comparison; relevant to emissions risk from weakening decarbonisation incentives.
• Reform UK, "Our Policies" (2026): Reform pledges cheaper energy by scrapping net-zero policies, levies and taxes; defines policy direction but not details.