Cabinet members fear speed of switch to renewable energy will heap more pressure on households struggling with energy bill and tax rises.
Senior Cabinet ministers believe there should be a rethink of the Government’s net zero plans as the country faces the biggest cost of living crisis in a generation, The Telegraph can disclose.
A number of ministers have expressed concern that the pace of the planned switch to renewable energy is too fast and is increasing costs for consumers. They believe Britain should use more of its own gas in the short-term.
On Thursday, it was announced that energy bills will rise by almost £700 from April – an increase of more than 50 per cent and the largest on record.
Rishi Sunak, the Chancellor, announced a £9billion bailout, which will see rebates of £200 for all bills and a £150 council tax cut for those in less expensive homes, to help households cope with the unprecedented rise.
However, a controversial green energy levy, which will add £153 a year to the average bill from April, has been kept.
The Bank of England also raised interest rates to 0.5 per cent, warning that inflation would hit seven per cent by April amid growing fears over a cost of living crisis.
Andrew Bailey, the Bank’s Governor, said the country was facing the worst crunch to household incomes since its records began in 1990. However, he also urged workers not to ask for big pay rises or they would risk making inflation worse.
Wage growth slowed to just 4.2 per cent at the end of last year, meaning workers will require an 8.7 per cent pay rise for their salaries to keep pace with current levels of inflation.
Cabinet ministers are increasingly uneasy about Downing Street’s focus on its net zero target and have warned that the cost of living crisis should be given more priority in the coming years.
One said the UK “should not be running towards net zero so aggressively”, describing the 2050 pledge as one of the “most aggressive targets in the world”.
“We’ve stigmatised gas, and that’s wrong,” the minister said. “Gas has to be part of the answer.”
Another Cabinet minister told The Telegraph: “The priority should be the cost of living – 2050 is a long way away, and our own gas is a valuable transition fuel in the meantime.” That view is understood to be shared by at least another two Cabinet ministers.
Mr Sunak indicated that he may share these concerns, and highlighted that North Sea gas “plays an important part of our transition to net zero”.
He told a Downing Street press conference: “I want to make sure that people acknowledge that we should also exploit our domestic resources. We have resources in the North Sea, and we want to encourage investment in that because we’re going to need natural gas as part of our transition to getting to net zero.
“And in the process of getting from here to there, if we can get investment in the North Sea that supports British jobs, that’s a good thing. So that has to be part of the mix as well.”
The Telegraph can reveal that Mr Sunak has asked Kwasi Kwarteng, the Business Secretary, to fast-track new licences for North Sea gas exploration.
A source close to Mr Kwarteng said he believed the North Sea oil and gas industry should be protected to prevent imported energy becoming a “geopolitical weapon” that can be used against Britain.
“You cannot turn the taps off overnight, because restricting North Sea production doesn’t restrict demand,” a government source added.
This week, the EU announced that it classed gas as a “bridge” to its own net zero target, along with nuclear power.
Mr Sunak said it was “not sustainable” to keep energy bills “artificially low” amid rising prices on global markets, fuelled by concern about Russian aggression on the Ukrainian border.
“Higher energy prices are something that we’re going to have to adjust to in common with other countries around the world and it would be wrong to pretend otherwise,” he said.
In a statement to MPs on the Government’s plans to ease the cost of living crisis, the Chancellor announced a £200 energy rebate in October that must be paid back in installments over the next five years.
Households in council tax bands A to D will also receive a one-off £150 rebate in April that does not have to be returned to the Treasury.
The net zero pledge, which is enshrined in law, means Britain is committed to carbon-neutral energy consumption by 2050.
Despite investment in renewable production, the UK’s energy and fuel consumption is still heavily reliant on gas, much of which is used for domestic and commercial heating.
A Labour plan for a windfall tax on North Sea oil and gas companies to pay for measures to ease the cost of living crisis has been rejected by ministers, and the Government has been criticised by environmentalists for allowing new oil and gas plants to open despite its net zero plans.
The UK’s Oil and Gas Authority continues to offer new licences to oil and gas extractors in the North Sea.
On Tuesday, the Government announced it had approved extraction of oil and gas from the Abigail oil field off the east coast of Scotland.
Work on the Cambo oil field, off Shetland, has been paused after the oil giant Shell announced it had decided not to invest in the project.
While it was welcomed in advance of the Cop26 summit in Glasgow last year, the net zero pledge is controversial among backbench Conservatives. A caucus of sceptical MPs launched a “scrutiny” group for the policy last month.
The group includes Esther McVey, a former Cabinet minister, and is fronted by Steve Baker, who also played a leading role in two other influential backbench caucuses – the lockdown-sceptic Covid Recovery Group and the pro-Brexit European Research Group.
The net zero pledge was also cited in the resignation letter of Lord Frost, who left the Government in December over “concerns about the current direction of travel” of Boris Johnson’s administration.
Earlier this week, the Telegraph revealed that the Government is watering down Lord Frost’s planned bonfire of EU regulations amid concerns it could undermine the pledge.
A government paper said the planned “two in, one out” rule to remove EU rules from UK statute was not “consistent with delivering world-class regulation to support the economy in adapting to a new wave of technological revolution or to achieving net zero”.
Ministers are braced for further anger about cost of living in the coming weeks, as a planned 1.25 per cent point increase in National Insurance Contributions takes effect, while council tax bills will increase and income tax brackets will be frozen.
Average household bills will rise by £2,922 overall this year, a Telegraph analysis found.
In Parliament on Thursday, Mr Sunak faced accusations from Tory backbenchers that he was a socialist.
Peter Bone, the MP for Wellingborough, said: “Conservatives believe in holding taxes down and putting more money into people’s pockets so they can decide how to spend it. Socialists believe in raising taxes and then choosing to give it back in the form of discounts and rebates to selective people the Government thinks need it.
“Can the Chancellor tell me why his approach, raising National Insurance Contributions, and then handing back money to people through rebates and discounts, is that a Conservative approach or a socialist approach?”
Mr Sunak replied: “It is a Conservative approach to be responsible for our nation’s finances.” https://www.telegraph.co.uk/…/ministers-urge-boris…/
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