GB Energy Faces Doubts as UK Declines to Affirm Future Funds

(Bloomberg) -- A promised £8.3 billion ($10.5 billion) funding package for the UK’s nascent state-owned company GB Energy is under question as the Treasury considers what to include in its multi year spending plan due in June. 

The government has touted GB Energy as a crucial tool to give the public a direct stake in the transition to renewable energy while also creating jobs and building supply chains in the country. But since its launch in July, the government venture has been slow to define what exactly its role will be and how it will make money for taxpayers as promised. 

The Treasury declined to confirm that the government was still committed to spending the £8.3 billion that Labour promised during the election, when asked by Bloomberg News. 

The government is committed to GB Energy and the Warm Homes Plan, according to a spokesperson. It is normal that decisions on spending, including on areas set out in the government’s manifesto, are set out at the spending review, the spokesperson said.

Prime Minister Keir Starmer has made energy policy a key pillar of the government’s strategy, with ambitious goals to cut carbon emissions and also bring down consumer bills that have helped drive inflation and a cost of living crisis in recent years. The government is facing tough decisions on spending with a big push for military chiefs to increase defense spending.

A lack of clarity on how GB Energy would spend its budget might make it an easy target for cuts, according to a person familiar with ministers’ thinking. 

So far the government has provided £125 million for Great British Energy to get set up with its headquarters in Aberdeen, Scotland. Dan McGrail was named as the interim chief executive officer of GB Energy on Thursday. The chair, Jürgen Maier, has kept a low profile since his appointment in July apart from an interview with Sky News two weeks ago where he said it might take 20 years to deliver the government pledge of 1,000 jobs for Aberdeen.

In the most recent budget the Chancellor of the Exchequer Rachel Reeves signed off on £3.4 billion for the Warm Homes Plan over three years, a reiteration of spending that was committed by the previous Conservative Party-led government. The Treasury also declined to reiterate a pledge to increase the subsidies for home improvements like added insulation. That’s not included in GB Energy’s funding. 

Reeves is also facing the prospect of having to cut the overall level of public spending to ensure she continues to meet her self-imposed fiscal rule that requires day-to-day spending to be covered by tax receipts. Initial forecasts she has received from the Office for Budget Responsibility show she is on course to breach her fiscal rule, hence the need for spending cutbacks or tax increases at her spring economic update on March 26.

(Updates to include government comment in fourth paragraph)

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