LONDON — The wait is finally over. After weeks of briefings, speculation, and U-turns, Chancellor Rachel Reeves has set out her final tax and spending plans for the year ahead. As expected, there is plenty for policy wonks to chew over. To make your lives easier, we’ve digested the headline budget announcements on energy, financial services, tech, and trade, and dug deep into the documents for things you might have missed.  ENERGY  The government really wants to bring down bills: Rachel Reeves promised it would be a cost-of-living budget, and surprised no one with a big pledge on families’ sky-high energy bills. She unveiled reforms which, the Treasury claims, will cut bills by £150 a year — by scrapping one green scheme currently paid for through bills (the Energy Company Obligation) and moving most of another into general taxation (the Renewables Obligation). The problem is, the changes will kick in next year at the same time bills are set to rise anyway. So will voters actually notice? The North Sea hasn’t escaped its taxes: Fossil fuel lobbyists were desperate to see a cut in the so-called Windfall Tax, which, oil and gas firms say, limits investment and jobs in the North Sea. But Rachel Reeves ultimately decided to keep the tax in place until 2030 (even if North Sea firms did get a sop through rules announced today, which will allow them to explore for new oil and gas in areas linked to existing, licensed sites.) Fossil fuel lobbyists, Offshore Energies UK, were very unimpressed. “The government was warned of the dangers of inaction. They must now own the consequences and reconsider,” it said. FINANCIAL SERVICES Pension tax changes won’t arrive for some time: The widely expected cut in tax breaks for pension salary sacrifice is set to go ahead, but it will be implemented far later than thought. The thresholds for exemption from national insurance taxes on salary sacrifice contributions will be lowered from £60,000 to £2,000 in April 2029, likely to improve forecasts for deficit cuts in the later years of the OBR’s forecasts. The OBR has a markets warning: The U.K.’s fiscal watchdog warned that the price-to-earnings ratio among U.S. equities is reminiscent of the dotcom bubble and post-pandemic rally in 2021, which were both followed by significant market crashes. The OBR estimated a global stock market collapse could cause a £121 billion hike in U.K. government debt by 2030 and slash U.K. growth by 0.6 percent in 2027-28. Even if the U.K. managed to stay isolated from the equity collapse, the OBR reckons the government would still incur £61 billion in Public Sector Net Financial Liabilities. Banks back British investments: British banks and investment houses have signed an agreement with the Treasury to create “invest in Britain” hubs to boost retail investment in U.K. stocks, a plan revealed by POLITICO last week. Reeves also finally tabled a cut to the tax-free cash ISA allowance: £12,000 from spring 2027 (the amount and timings also revealed by POLITICO last week), down from £20,000, with £8,000 slated for investments only. Over-65s will keep the full tax-free subscription amount. Also hidden in the documents was an upcoming consultation to replace the lifetime ISA with a “new, simpler ISA product to support first-time buyers to buy a home.” No bank tax: Banks managed to dodge a hike in their taxes this time, despite calls from the IPPR for a windfall-style tax that could have raised £8 billion. The suggestions (which also came from inside the Labour Party) were met with an intense lobbying effort from the banks, both publicly and privately. By the eve of the budget, City figures told POLITICO they were confident taxes wouldn’t be raised, citing the high rate of tax they already pay and Reeves’ commitment to pushing for growth through the financial services industry. TECH ‘Start, scale, stay’ is the new mantra:  Startup founders and investors were in panic mode ahead of the budget over rumored plans for an “exit tax” on wealthy individuals moving abroad, but instead were handed several wins on Wednesday, with Reeves saying her aim was to “make Britain the best place in the world to start up, to scale up and to stay.” She announced an increase in limits for the Enterprise Manage Scheme, which incentivizes granting employees share options, and an increase to Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) thresholds to facilitate investment in growing startups. A further call for evidence will also consider “how our tax system can better back entrepreneurs,” Reeves announced. The government will also consider banning non-compete clauses — another long-standing request from startups. Big Tech will still have to cough up: A long-standing commitment to review a Digital Services Tax on tech giants was quietly published alongside the budget, confirming it will remain in place despite pressure from the Trump administration. The government will ‘Buy British’ on AI: Most of the government’s AI announcements came ahead of the budget — including plans for two new “AI Growth Zones” in Wales, an expansion of publicly owned compute infrastructure — meaning the only new announcements on the day were a relatively minor “digital adoption package” and a commitment to overhaul procurement processes to benefit innovative tech firms. But the real point of interest on AI came in the OBR’s productivity forecasts, which said that despite the furor over AI, the technology’s impacts on productivity would be smaller than previous waves of technology, providing just a 0.2 percentage point boost by 2030. The government insists digital ID will ultimately lead to cost savings. | Andrea Domeniconi/Getty Images OBR delivers a blow to digital ID: The OBR threw up another curveball, estimating the cost of the government’s digital ID scheme at a whopping £1.8 billion over the next three years and calling out the government for making “no explicit provision” for the expense. The government insists digital ID will ultimately lead to cost savings — but “no specific savings have yet been identified,” the OBR added. TRADE  Shein and Temu face new fees: In a move targeted at online retailers like Shein and Temu, the government launched a consultation on scrapping the de minimis customs loophole, which exempts shipments worth less than £135 from import duties. These changes will take effect from March 2029 “at the latest,” according to a consultation document. Businesses are being consulted on how the tariff should be applied, what data to collect, whether to apply an additional administration fee, as well as potential changes to VAT collection. Reeves said the plans would “support a level-playing field in retail” by stopping online firms from “undercutting our High Street businesses.”  Northern Irish traders get extra support: Also confirmed in the budget is £16.6 million over three years to create a “one-stop shop” support service to help firms in Northern Ireland navigate post-Brexit trading rules. The government said the funding would “unlock opportunities” for trading across the U.K. internal market and encourage Northern Ireland to take advantage of access to EU markets.  There’s a big question mark over drug spending: Conspicuously absent was any mention of NHS drug spending, despite U.K. proposals to raise the cost-effectiveness threshold for new drugs by 25 percent as part of trade negotiations with the U.S., suggesting a deal has not yet been finalized. The lack of funding was noted as a potential risk to health spending in the Office for Budget Responsibility’s Economic and Fiscal Outlook, which was leaked ahead of the budget. 

LONDON — Ministers must act now to address an “emerging risk to gas supply security,” the government’s official independent energy advisers have warned.  The government must make plans to avert a threat to future gas supplies, the National Energy System Operator (NESO) said.  While the advisers say the conditions creating a gas supply crisis are unlikely, any shortage would have a severe impact on the country. In its first annual assessment of Britain’s gas security, expected to be released later today but seen by POLITICO, the NESO said diminishing reserves of gas in the North Sea and competition for imports are creating new energy security risks, even as the country’s decarbonization push reduces overall demand for the fossil fuel.  Britain is projected to have sufficient gas supplies for normal weather scenarios by winter 2030/31, but in the event of severe cold weather and an outage affecting key infrastructure, supply would fall well short of demand, NESO projects.   The scenario in the report involves what the NESO calls the “unlikely event” of a one-in-20-year cold spell lasting 11 days alongside the loss of vital infrastructure.   If this were to occur, the consequences of a shortfall in gas supply could be dire.   It could trigger emergency measures including cutting off gas from factories, power stations, and — in extreme scenarios — homes as well. It could take weeks or months to return the country to normal.   The vast majority of homes still use gas boilers for heating.   VULNERABILITY Informed by the NESO’s findings, ministers have published a consultation setting out a range of options for shoring up gas security.  It comes amid growing concern in Whitehall about the U.K.’s vulnerability to gas supply disruptions. Russia is actively mapping key offshore infrastructure like gas pipelines and ministers have warned it has the capability to “damage or destroy infrastructure in deepwater,” in the event that tensions over Ukraine spill over into a wider European conflict.  While Britain has long enjoyed a secure flow of domestically-produced gas from the North Sea — which still supplies more than a third of the fuel — NESO’s report says gas fields are experiencing “rapid decline.” The amount available to meet demand in Britain falls to “12 to 13 percent winter-on-winter until 2035,” it says.  That will leave the U.K. ever more dependent on imports, via pipeline from Norway and increasingly via ship-borne liquefied natural gas (LNG) from the U.S. — and Britain will be competing with other countries for the supply of both.  The report projects that during peak demand periods in the 2030s, the Britain’s import dependency will be as high as 90 percent or more.  Overall, gas demand will be lower in the 2030s because of the shift to renewable electricity and electric heating, but demand will remain relatively high on very cold days, and when there is little wind to power offshore turbines, requiring gas power stations to be deployed, the report says.  “This presents emerging risks that we will need to understand to ensure reliable supplies are maintained for consumers,” it adds.  Reducing demand for gas by decarbonizing will be key, the report says, and risks are higher in scenarios where the country slows down its shift away from gas.   But decarbonization alone will not be enough to ensure the U.K. would meet the so-called “N-1 test” — a sufficient supply of gas even if the “single largest piece” of gas infrastructure fails — during a prolonged cold spell in winter 2030/31. In that scenario, “peak day demand” is projected to reach 461 million cubic meters (mcm), but supply would fall to 385 mcm, resulting in a supply deficit of 76 mcm, a shortfall of around 16 percent of what is needed to power the country on that day.  That means ministers should start considering alternative options now, including the construction of new infrastructure like storage facilities, liquefied natural gas (LNG) import terminals, or new onshore pipelines to ensure more gas can get from LNG import sites to the rest of the country. The government consultation will look at these and other options.   The critical piece of gas infrastructure considered under the N-1 test is not identified for security reasons, but is likely to be a major import pipeline from Norway or an LNG terminal. The report says that even “smaller losses … elsewhere in the gas supply system” could threaten gas security in extreme cold weather.  GAS SECURITY ‘PARAMOUNT’  The findings will likely be seized on by the oil and gas industry to argue for a more liberal licensing and tax regime in the North Sea, on a day when the government announced its backing for more fossil fuel production in areas already licensed for exploration.  But such measures are unlikely to be a silver bullet. The report says: “Exploration of new fields is unlikely to deliver material new capacity within the required period.”  Deborah Petterson, NESO’s director of resilience and emergency management, said that gas supply would be “sufficient to meet demand under normal weather conditions.”  “We have, however, identified an emerging risk to gas supply security where decarbonization is slowest or in the unlikely event of the loss of the single largest piece of gas infrastructure on the system.  “By conducting this analysis, we are able to identify emerging risks early and, crucially, in time for mitigations to be put in place,” she added.  A spokesperson for the Department of Energy Security and Net Zero said ministers were “working with industry to ensure the gas system is fit for the future, including maintaining security of supply — which is paramount.”   “Gas will continue to play a key role in our energy system as we transition to clean, more secure, homegrown energy,” they added. “This report sets out clearly that decarbonization is the best route to energy security — helping us reduce demand for gas while getting us off the rollercoaster of volatile fossil fuel markets.”  Glenn Bryn-Jacobsen, director of energy resilience and systems at gas network operator National Gas Transmission, said in the short-term, Britain’s gas supply outlook was “robust” but that “looking ahead, we recognise the potential longer-term challenges.” “Gas remains a critical component of Britain’s energy security — keeping homes warm, powering industry, and supporting electricity generation during periods of peak demand and low renewable output,” he added. “In considering potential solutions, it is essential to look at both the gas supply landscape and the investment required in network infrastructure,” he said. 

LONDON — U.K. Energy Secretary Ed Miliband was on the world stage last week demanding high-polluting fossil fuels are phased out of global energy systems.  “This is an issue that cannot be ignored,” he told the COP climate summit in Brazil.  Yet this week could see his own government water down commitments to phase out fossil fuels. Insiders say a drawn-out fight over the future of drilling in the U.K.’s Scottish oil and gas heartlands is finally reaching its conclusion.  It is a row which has split the governing Labour Party, pitted Miliband against the all-powerful Treasury, and will, some of Labour’s own MPs fear, undermine the government’s climate credentials and expose the party to even more political pain.  “If a progressive government with a big majority, in the country that started the Industrial Revolution, can’t hold firm on new fossil fuel drilling,” worried one Labour MP, “how can we expect developing countries to do what’s needed to tackle climate change?”  The MP, along with other officials and experts in this piece, was granted anonymity to give a frank view on sensitive political planning.  The decisions follow months of full-throated lobbying by fossil fuel companies, who argue tough action against high-polluting oil and gas firms will hit jobs and derail the wider economy — but also by green campaigners, desperate to hold Labour to its promises to make the U.K. a global climate leader.  And there is a growing risk for ministers that, as the government searches for a compromise to satisfy the party and balance fiscal demands with net-zero ambitions, it will land on a solution which pleases no one at all.  LICENSES, TAXES, ELECTIONS Two government figures and three figures from industry told POLITICO they expect minsters to announce a decision on North Sea licenses on Wednesday, to coincide with the Budget.  Labour swept to power last year on a promise to ban new oil and gas exploration licenses in the declining basin, as well as maintaining taxes on high polluters in the North Sea.  But there is likely to be a “pragmatic” shift on North Sea policy, one of the government figures said. Officials are looking at allowing oil and exploration on existing fields (so-called “tiebacks”) and potentially loosening rules on investment relief, they said.  Fossil fuel lobbyists argue that, without this sort of help, thousands of jobs and billions in investment are at risk.  “There is a sense that the industry are not crying wolf this time,” the same government figure said.  The tax is currently set to remain until 2030, but Chancellor Rachel Reeves is considering scrapping it earlier, in a bid to drive the U.K.’s stalling economy. | Pool photo by Leon Neal via Getty Images They added that ministers will likely be making decisions with Scottish elections in May firmly in mind — conscious that the future of the oil and gas sector is a priority for many Scottish voters already worried about the decline of the North Sea economy, embodied in the closure of Grangemouth refinery.  Approving tiebacks would allow Miliband to say he has stuck to his election pledge while still expanding opportunities for oil and gas producers.  The Treasury is also due to decide the future of the Windfall Tax on oil and gas companies before the end of the year — a levy on profits hated by the industry but used to fund Miliband’s rush to move the U.K. to a cleaner energy system.   The tax is currently set to remain until 2030, but Chancellor Rachel Reeves is considering scrapping it earlier, in a bid to drive the U.K.’s stalling economy.  Lobby group Offshore Energies UK (OEUK) claims the country could enjoy a £40 billion economic boost if the Windfall Tax was ditched as soon as next year.   A fourth industry figure said a decision on whether to approve drilling on the controversial Rosebank gas field — which already holds a license — could also come this week, although the field’s developers think it is more likely in the new year. Officials from Miliband’s Department for Energy Security and Net Zero summoned OEUK for a meeting Friday in Whitehall, according to two of the industry figures. ‘POLITICALLY STUPID’  The idea of softening fossil fuel policy is alarming some on Labour’s backbenches.  Referencing the pledge not to allow new drilling licenses, Barry Gardiner, an environment minister under Tony Blair and now a member of parliament’s Environmental Audit Committee, said: “It is a commitment that I am sure the chancellor will wish to honor, given that yet another broken promise or U-turn would be as politically stupid as it would be environmentally illiterate.”  The pledge, he said, had “sat happily with the U.K’s commitment at the last COP to phase out fossil fuels.” Fellow Labour MP Clive Lewis said any watering-down would be a “mistake.”   “It would signal that the government is more focused on reassuring fossil-fuel interests than giving the public a credible plan for energy security and climate stability. Voters aren’t blind to that,” he said.  But their views are not shared across the party.  Mary Glindon, a Labour MP in the former industrial city of Newcastle, hosted OEUK in parliament earlier this month.  “The truth is that our once proud North Sea energy industry is shedding about one thousand jobs a month. … Without renewed investment, I fear for our communities and the prosperity of our young people,” she told an audience of MPs, lobbyists and business leaders.  OEUK, in a letter to Prime Minister Keir Starmer this September, seen by POLITICO, said that “without fiscal reform, changes to the regulatory framework and licensing will be insufficient on their own to transform the outlook for the industry.” | Pool Photo by Henry Nicholls via Getty Images Policy in the North Sea must show workers “that we are on their side,” Scottish Labour MP Torcuil Crichton told POLITICO earlier this year.   Gary Smith, general secretary of GMB Union — traditionally a champion of Labour which represents thousands of oil and gas workers — told the same OEUK event: “This is a crucial moment in terms of the Budget, and if the government gets this wrong on the future that the North Sea, it will be a strategic, long-term disaster for this country.”   A DESNZ spokesperson said: “We will implement our manifesto position in full to not issue new licences to explore new oil and gas fields. “Our priority is to deliver a fair, orderly and prosperous transition in line with our climate and legal obligations, with the biggest ever investment in offshore wind and first of a kind carbon capture and storage clusters.” PRESSURE ALL AROUND Even if the government is willing to upset its greenest backbenchers, it still won’t be enough to win round the biggest backers of oil and gas.  OEUK, in a letter to Prime Minister Keir Starmer this September, seen by POLITICO, said that “without fiscal reform, changes to the regulatory framework and licensing will be insufficient on their own to transform the outlook for the industry.” Robin Allan, chairman of the lobby group BRINDEX, also argues potential changes to the industry’s fiscal and licensing regimes would do little to revive the industry.  “The tweaking and tinkering of existing policies will not make the North Sea an investable basin,” he said. To restore business confidence, he argued, “wholesale reform is needed.”  There is nervousness inside Labour that attempts to navigate these pressures will leave the government, already struggling with voters, even more vulnerable.  The Green Party, helmed by media-savvy new leader Zack Polanski, is rising in the polls.   Labour would be “wriggling out” of their climate commitments if they pushed ahead with tiebacks and Windfall Tax reforms, argued Green MP and the party’s Westminster leader Ellie Chowns. It would be “politically mad to allow new drilling licences when the Greens are surging in the polls,” argued the same Labour MP quoted at the top of this article.  “The growing support for the [Green Party] shows that people want honesty, consistency and a transition [to net zero] that protects workers and communities rather than corporate profits,” said Clive Lewis.  And the pressure would not just come from the left.   Nigel Farage’s poll-topping Reform UK has promised to let oil and gas companies drill the North Sea basin until it is dry.  The Conservatives, too, are staking out a much stronger line backing fossil fuels.  “Anything short of an overturn of the [Windfall Tax] and … a complete overturn of the [licensing] ban is going to fall far short of what the industry needs at this time,” said Tory Shadow Energy Minister Andrew Bowie.  Think tanks close to Miliband’s own left flank of politics are getting restless.   Softening the regime in the North Sea might appear to have political dividends by heading off the Tories and Reform, said Alex Chapman, senior economist at the New Economics Foundation, but Labour should resist it. “I think it would be a terrible, terrible decision,” he said. 

LONDON — Keir Starmer loves to play the climate leader. But only when his political advisers (and the powerful Chancellor Rachel Reeves) tell him he’s allowed. The green-minded U.K. prime minister flies into the COP30 summit in Brazil Thursday, armed with undeniable climate credentials. His government is pressing ahead with a 2050 net zero target, even as right-wing political rivals at home run away from it. It is about to hand 20-year contracts, laden with financial guarantees, to companies developing offshore wind farms. Just by attending COP, Starmer has shown he’s willing to publicly back the faltering global climate cause, despite furious attacks on the green agenda by close ally Donald Trump. But his claim to global leadership comes with a catch. Action on climate change is also tied to the political agenda back home, where Starmer and Reeves insist they are focused on bringing down bills and driving economic growth. As the prime minister flies in and out of Brazil this week, those key themes dominate. In a speech on Tuesday, Reeves pledged to “bear down” on the national debt and focus on the cost of living — even it requires “hard choices” elsewhere. Climate is no exception. SHY GREEN It was Starmer’s “personal decision” to go to Brazil, U.K. Climate Minister Katie White told a pre-COP event in London on Tuesday. It was reported in the run-up to the summit that he would skip Brazil, amid concerns among his top political aides about the optics of a jaunt to South America to talk climate while voters — disillusioned with Starmer and Labour — struggle with the cost of living at home and brace for tax rises expected in the budget. In the end, Starmer opted to go. But the absence of a full traveling press delegation, the norm at previous COPs, means his visit will generate less media coverage. (Government officials insisted the decision not to take a full press pack was purely logistical.) Starmer, while not an expert, is instinctively supportive of climate action, said one government official. But not so much so, countered a Labour MP, that he has “his own ideas about things.” “He wants to do the right thing, but would be steered as to whether that’s talking about forests or clean power or whatever. I suspect [No 10 Chief of Staff] Morgan McSweeney didn’t want him to go,” said the MP, granted anonymity to give a frank assessment of their leader. JOBS AT HOME GOOD, TREES ABROAD BAD The COP30 leaders’ event is taking place in Belém, the Amazon port city near the edge of the world’s greatest rainforest. But in a symbol of how domestic messaging trumps all else, Starmer will use that global platform to talk about a somewhat less exotic port: Great Yarmouth in East Anglia. It’s one of three U.K. locations — along with Greater Manchester and Belfast — where new, private sector clean energy deals are being announced, securing a modest 600 jobs. The COP30 leaders’ event is taking place in Belém, the Amazon port city near the edge of the world’s greatest rainforest. | Mauro Pimentel/AFP via Getty Images If COP’s Brazilian hosts were hoping for a grander global climate vision, they are about to be disappointed. The U.K. won’t be stumping up any taxpayer money for a global fund to support poorer countries to protect their tropical rainforests — key carbon sinks that, left standing, can help slow the rate of climate change. The Tropical Forests Forever Facility (TFFF) is supposed to be the centerpiece of the summit for Brazilian President Luiz Inácio Lula da Silva, but Lula has not been able to rely on even his close, left-wing ally Starmer — with whom he likes to chat about football — to weigh in with a financial contribution to match Brazil’s $1 billion. The U.K. played a role in establishing the concept of the TFFF. An energy department spokesperson said the government remained “incredibly supportive” of the scheme. But, with Reeves warning this week that her budget would deal with “the world as we find it, not the world as I would wish it to be,” her Treasury officials won a Whitehall battle over the U.K.’s financial backing for the scheme. Ministers say only that they will try to drum up private sector investment. ‘KEIR, SOMEWHERE IN THE MIDDLE’ The decision neatly captures the Starmer approach to climate action. If it suits the domestic economic and political agenda, great. If not then, then there is no guarantee of No. 10 and Treasury support. Taxpayer-funded international aid spending, a vital part of the U.K.’s global climate offer, has been slashed. At the same time, despite stretching emissions goals, one of the world’s busiest airports, Heathrow, will be expanded — because of its potential benefits for growth. Ministers are looking at watering down a pledge to ban new licences for oil and gas exploration in the North Sea, amid a sclerotic economy. The Treasury is considering easing the tax burden on fossil fuel companies. The bipolar approach risks bringing Starmer and Reeves into conflict with the U.K.’s energetic, committedly green Energy Secretary Ed Miliband, who will lead the country’s delegation to the COP30 conference and the formal United Nations negotiation. “On all of this, there is Ed on one side, Rachel on the other, and Keir somewhere in the middle,” said the government official. Starmer largely subcontracts his climate and energy policy to Miliband, said an industry figure who frequently interacts with government. Many MPs wish Starmer would act more like Miliband and embrace his green record more exuberantly. They point to the recent surge in support for the Green Party, which is making some in Labour nearly as nervous as the rise of Nigel Farage’s Reform UK to their right. OUTFLANKED In that context, it was a “no-brainer” for Starmer to go to COP and appear “visibly committed to climate action,” said Steve Akehurst from the political research firm Persuasion UK. “In so far as there is any real backlash to net zero in the U.K., it does not exist inside the Labour electoral coalition,” he said. The Greens are now “competing strongly for those votes.” A second Labour MP put it bluntly. “Starmer is so politically weak that to not attend would open up yet another front on his already collapsed centre-left flank,” they said. Before getting on the plane to Brazil, Starmer met sixth-form students at 10 Downing Street to talk about the summit and the environment. There was a flash of the green, idealistic Starmer that some say lurks beneath the political triangulation. He took the opportunity to remind the teenagers of the “obligation we undoubtedly have to safeguard the planet for generations to come.” “But also,” he added, it’s about safeguarding “hundreds of thousands of jobs in this country.” Additional reporting by Abby Wallace.

LONDON — American pharmaceutical giants will start to shutter their U.K. operations unless Keir Starmer’s government agrees to pay more for their drugs, U.S. Ambassador to the U.K. Warren Stephens warned ministers on Wednesday. “The U.K. needs to continue addressing its pricing structures for medicines to ensure it can compete for investment from U.S. firms,” Stephens told a U.K.-U.S. business gathering in central London attended by British trade and foreign ministers. “If there are not changes made, and fast, pharma businesses will not only cancel future investments, they will shut down their facilities in the U.K.,” the diplomat said. “This would be a major blow to a country that prides itself, rightly so, on its life sciences sector.”  The U.K. is locked in drug-pricing negotiations with the Trump administration and pharmaceutical firms about how much the National Health Service pays for their products through the so-called Voluntary Scheme for Pricing, Access and Growth (VPAG) scheme. Britain has offered to increase the threshold at which the NHS pays firms for medicines by up to 25 percent, POLITICO first reported in October. But pharmaceutical executives are pushing the government to go further. American drugmaker Eli Lilly’s international business chief said on Monday that it wants to see more changes to Britain’s medicine market before it pivots on its abandoned £279 million investment in a biotech incubator project. “I don’t think we have heard enough to say that we are willing to get the Lilly Gateway Lab started,” Patrik Jonsson, president of Lilly’s international business, which covers all markets outside the U.S., told POLITICO. The focus of talks has turned to the government’s “clawback” system, where firms have to pay back part of their revenue if the total amount the NHS spends on drugs rises above a certain cap. Unless ministers agree to also raise that cap, any extra NHS spending will mean a larger clawback bill for pharma companies. Pricing talks feature in the U.K.’s ongoing trade negotiations with Washington after Starmer struck a framework trade deal with Trump in May, promising to “improve the overall environment” for pharmaceutical firms operating in Britain. U.K. negotiators are currently in Washington and “progress is being made on this literally as we speak,” Stephens said, adding he hopes “that will yield some success.”  The U.K.’s “chief obstacle” to growth is also its high energy costs, Stephens added. “If there are not major reforms to U.K. energy policy, then the U.K.’s position as a premier destination in the global economy is vulnerable.”  Britain’s Labour government is “completely signed up to an ambitious agenda for business,” said Trade Minister Chris Bryant, in an address following Stephens’ speech. He set out how the government plans to “integrate” its industrial, small business and trade strategies to grow the economy.

LONDON — Former British Prime Minister Theresa May laid into her own political party Monday night, accusing it of taking a populist tilt to the right that risks emboldening Nigel Farage. May criticized the Conservatives’ decision to repeal the Climate Change Act 2008, which requires the government to cut carbon emissions by 80 percent by 2050, as an “extreme and unnecessary measure”  that would “fatally undermine” Britain’s leadership on climate issues. The U.K. committed to reaching net zero under May’s administration, something Tory Leader Kemi Badenoch has since called “impossible.” Badenoch has also advocated extensive oil and gas extraction from the North Sea. “This announcement only reinforces climate policy as a dividing line in our politics, rather than being the unifying issue it once was,” May told fellow members of the House of Lords. “And, for the Conservative Party, it risks chasing votes from Reform at the expense of the wider electorate.” May also lambasted the “villainization of the judiciary” by politicians “peddling populist narratives” and said this would “erode public trust in the institutions of our democracy and therefore in democracy itself.” Shadow Justice Secretary Robert Jenrick, who narrowly lost the Tory leadership contest last year, used his conference speech earlier this month as a tirade against “dozens of judges with ties to open-borders charities” and said “judges who blur the line between adjudication and activism can have no place in our justice system.” Though May recalled “frustrating” experiences coming up “against the courts” as a minister, she urged her party to “tread carefully.” “Every step we take to reduce our support for human rights merely emboldens our rivals and weakens our position in the world,” the former prime minister said. “Those politicians in the Western world who use populism and polarisation for their own short-term political ends risk handing a victory to our enemies.”

WARWICK, England — Jon Butterworth is the guy tasked with helping protect the country if there’s ever a major attack on Britain’s energy system. The boss of National Gas, he oversees thousands of miles of transmission pipelines, the crucial network of pressurized pipes transporting gas to power stations, heavy industry, and via local distributors to heat millions of British homes.  That’s the day job. But if Britain ever faced a gas supply emergency, Butterworth would have sweeping powers to control domestic gas flows, if necessary cutting off factories, power stations, and — in extreme scenarios — homes as well, to preserve supply for hospitals and other vital infrastructure. It’s a role that puts him on the frontline of national efforts to prepare for potential attacks on U.K. energy supplies by enemies like Vladimir Putin’s Russia.  Should such an emergency come, the government would need an Order in Council — a legal directive personally approved by the king — to overrule Butterworth, operating in his additional, little-known role as the country’s Network Emergency Coordinator.  Butterworth has barely sat down for an interview with POLITICO when, off-handedly, he starkly illustrates the major, ongoing shift in the country’s attitude toward energy security.  The National Control Centre — from where Butterworth’s team operates those critical pipelines — was sited in Warwick more than 20 years ago, he explains. The “business has grown around it” into what is now a sleek, modern technology park on the edge of town.  “In the future, we probably would not do that,” he said, with characteristic sangfroid. “We’d probably be putting it in a bunker.”  A bunker?  “That’s the government’s thinking,” Butterworth said, “about this sort of thing.”  ENERGY IN THE CROSSHAIRS  The reason for his (and the government’s) concerns are plain.   “Europe has become a bit more of a dangerous place, hasn’t it?” says Butterworth, a gas engineer by training who worked his way up from his first job, aged 17, at Rochdale gas works near Manchester.  Russia’s invasion of Ukraine, and its recent incursions into NATO countries, has put Europe on high alert. Russia has repeatedly demonstrated in Ukraine that it sees energy infrastructure as “a target,” says Butterworth.   Though the U.K. Labour government wants to wean the country off gas to clean power, it remains the lifeblood of everyday life in one of Europe’s most gas-dependent countries. The pipes transporting the fuel around the country are the vital arteries.  Downstairs from Butterworth’s office, in the control room, a big screen shows a schematic map of Britain. Five thousand miles of pipeline are represented by thin yellow lines. Around the coasts, red triangles represent entry points for gas coming ashore: via pipeline from Norway, from British drilling sites in the North Sea, or from ships laden with supercooled American or Qatari liquefied natural gas landing at Milford Haven in Wales and the Isle of Grain in Essex.  Britain’s energy supply is more vulnerable to adversaries today, Butterworth believes, than in the last century.  Jon Butterworth is the person at the frontline of the U.K.’s efforts to prepare for potential attacks on the country’s energy supplies. | National Gas “[In] the 1930s, we were a mile underground digging coal. You couldn’t really get any safer. Now we’re bringing boats across the high seas and we’ve got pipelines under the ocean. So it’s different.”  One former U.K. defense secretary has termed undersea infrastructure, including pipelines bringing gas into the country, “the soft belly of British security.”  EMERGENCY COORDINATOR   It’s these vulnerabilities that now occupy Butterworth’s thinking should he be called on to exercise his powers as NEC — a position enshrined in law. If the country’s gas supply was suddenly reduced, and the usual, market-based methods for covering the shortfall failed, Butterworth would be called on to declare a “network gas supply emergency.”  That would hand him sweeping legal powers to control national supply and demand of gas, with which gas companies would be legally required to comply, powers that can be over-ruled only on the say-so of the king — a responsibility Butterworth acknowledged with a nod, saying, “I’ve always found that quite fascinating myself.”  The NEC position has existed since the 1990s. Butterworth has held it since 2022. Since the invasion of Ukraine, he has been “more cognizant of” potential scenarios involving “loss of supply from the North Sea,” he said — as might be caused by a Nord Stream-style attack on a pipeline.  For years, National Gas has held annual wargame-style exercises to practise for an emergency. The next takes place later this month, involving 50 organizations — including the government — and 400 people.   The scenario is different each year. To trigger Butterworth’s emergency powers a combination of things would likely have to go wrong: a pipeline failure, for example, combined with a reduction in LNG supply and cold weather driving up demand.  THE CHRIS WHITTY OF ENERGY  In a network emergency — something Britain has never experienced and which remains “highly unlikely,” Butterworth stresses — to preserve gas for those that need it most, like hospitals, he could make public appeals for reduced gas use, require large gas users like power stations and factories to shut down or, in the most extreme cases, cut off gas to potentially large numbers of homes. Such a step would be taken to maintain the safety of the wider pipeline system. At all costs, the goal would be to avoid an unplanned loss of pressure somewhere in the network — a highly dangerous situation that can lead to gas leaks into homes or explosions.  “It’s never happened, so it’s hard to articulate,” Butterworth says. “But what’s important is that we do not lose pressure to the cities.”  “The right thing for our country transcends everything and that means minimizing any potential loss of life, whatever actions need to be taken, however damaging it is commercially,” he added. If the worst happened, he would also have a role advising government and likely communicating with the public about what was going on — like Chief Medical Officer Chris Whitty and Chief Scientific Adviser Patrick Vallance during COVID-19.   “A bit like an aircraft simulator, we rehearse and rehearse and rehearse for this day,” Butterworth says.  THE PATRIOT There remains only “a very small risk” of a network emergency, but that risk “must have increased a little” given the geopolitical situation, Butterworth believes.  A conventional attack on gas infrastructure has a probability of one to five percent on the government’s official risk register. A cyberattack on gas infrastructure is considered more likely, at five to 25 percent. National Gas has put “a lot of thought, horsepower, money, into cyber defense,” Butterworth said.  In the scenario laid out in the risk register, is takes “several months” to restore gas to all domestic customers — a very long time, particularly in winter.   “You’ve got half a million businesses, 23 million families that would require heat, plus the power stations.  … So it’s very important that it never happens,” Butterworth said  Now 63, Butterworth considers chief executive of National Gas his “second job.” The unpaid NEC is his first.  “I didn’t really realize it probably until I was 50 … that I’m a patriot,” he says. He has been appointed a Major in the 77th Brigade, the special British army unit that describes itself as specializing in “new forms of warfare.”   “You don’t contact them, they contact you,” Butterworth says. “I have a skillset that they wanted around networks and energy.”  HOW TO BE RESILIENT While as NEC he must think the unthinkable, he is confident the U.K. gas system and its supply lines are “resilient,” thanks to multiple supply routes via pipelines from Norway and other neighbors, from LNG that comes primarily from the U.S., and from the U.K.’s own reserves in the North Sea.  National Gas’s Winter Outlook report, due later this week, is expected to forecast sufficient gas supplies over the colder months, even in the event of unforeseen outages — although with tighter supply margins than in the previous four years. Butterworth welcomes reports ministers are looking at ways to allow some new oil and gas exploration near existing fields in U.K. areas of the North Sea. “With what’s going on around the world, particularly in Ukraine and the potential lack of gas in Europe, having sovereign gas supplies is helpful,” he says.  The government will soon publish a consultation on “gas system resilience,” looking at the security of U.K. gas supply and options for ensuring the country never has to call on Butterworth’s NEC powers.  He hopes it will show a government thinking about energy supply in the context of dangerous geopolitics.   “It’s going to tease out energy resilience. Military energy resilience. Sources of supply, etc. [The Department for Energy Security and Net Zero is] particularly tuned into this as a threat going forward,” he says.  And if the worst does happen?  Being prepared is “all we can do,” Butterworth says. “I’ve been rehearsing for 46 years.” 

LIVERPOOL, England — Gary Smith, the general secretary of the GMB union, has urged Labour to rethink its energy policy, or risk losing support among working class communities. Speaking in the POLITICO Pub at Labour conference Tuesday, Smith said the government was not “in the right place” on its energy policy as he warned the approach could alienate swathes of its working class supporters. “Moving to net zero is not cheap. It’s not going to be easy, and if you get it wrong it has huge consequences for the economy and for working people,” he said. “The truth is that at the moment, the whole green thing, the net nero thing, is switching working class communities off. People are not buying it.” His comments come ahead of a decision on Labour’s plans for the North Sea after the government proposed a ban on new oil drilling licenses. But Smith urged Labour not to “fudge” the policy, warning that its approach was already costing the party support ahead of crunch Scottish Parliament elections next year. “If they don’t listen to us, they’re going to face some harsh realities,” the union boss warned. The GMB general secretary also hit out at plans to increase the use of electric heating options as “just rubbish,” adding they would not be possible to roll out on a large scale. And ministers, he argued, were still “misunderstanding” the prospect of the alternative fuel approach being an effective way to reduce the U.K.’s reliance on gas. “I’m pragmatic and a realist. We’re going to need oil and gas for a long time to come. This nonsense that we’re moving to electric heat anytime soon is rubbish,” he said. “The number of people connecting to the gas grid is going up. The AI data centers are going to need gas for energy. That’s the truth.” And Smith said there were lessons to be learnt from U.S. President Donald Trump and Vice President J.D. Vance’s ability to connect with working class communities who feel “angry” about being abandoned by the mainstream political system. “There is stuff we need to learn from that, and that’s about listening to working class people’s concerns. People are not voting for cheap TVs and cheap training shoes anymore… People want jobs back. They want opportunity back. They want the standard of living to be rising again,” he said. “So, does the prime minister learn a lot from Trump? No, but what we do need to get better at is connecting and listening to working class people.”

LONDON — The U.K. government has quietly handed ministers new powers to reverse flagship climate promises and approve new drilling for fossil fuels.  Under new guidance drawn up in Whitehall, Energy Secretary Ed Miliband can give weight to the “wider benefits to the interests of the nation,” alongside environmental concerns, when deciding the future of controversial oil and gas fields.  Miliband has long insisted the U.K. must wean itself off high-polluting fossil fuels produced in oil and gas heartlands off the Scottish coast and embrace clean energy, like solar and wind power. But experts believe the new powers, buried in guidance published this summer by Miliband’s Department for Energy Security and Net Zero, provide a loophole to approve more drilling.  The document says that, when deciding whether to approve oil and gas licenses, “the secretary of state will usually consider, amongst other matters … the government’s overall energy and environmental objectives, and the potential economic and other advantages of the project proceeding.”  This hands Miliband the power to override objections and approve schemes, even if they breach environmental regulations, at a time when ministers are desperate to stimulate economic growth and get spiraling bills under control.  Donald Trump is also piling pressure on the government to change tack, describing North Sea oil as a “phenomenal” asset while speaking alongside Prime Minister Keir Starmer during his U.K. state visit last week. The U.S. president then raised the issue in his furious tirade at the U.N. on Tuesday, claiming to have repeatedly lobbied Starmer on the matter while he was in Britain. “I told it to him three days in a row. That’s all he heard: ‘North Sea oil, North Sea,’” he said. With looming decisions on whether to allow drilling on the vast Rosebank and Jackdaw fields in the North Sea, the new powers risk setting up a row between the energy secretary, green campaigners, and his own backbenchers.  NET ZERO SUM GAME Miliband’s political rhetoric hasn’t yet shifted an inch.    “Unless we get on to clean energy, we’ll continue to be subject to that roller coaster of fossil fuels,” he told the BBC this month. Political opponents like Nigel Farage, who wants to drain the North Sea of all remaining oil and gas, are spouting “nonsense and lies to pursue their ideological agenda,” Miliband said.   But some Labour MPs have noticed the guidance, and hope Miliband will now help out the drillers.   Gregor Poynton, Labour MP for Livingston, a constituency in Scotland’s central belt, said the powers were the right option given the U.K. is set “to rely on oil and gas for some time yet.”   Ed Miliband’s political rhetoric hasn’t yet shifted an inch.  | Pool photo by Justin Tallis via Getty Images Speaking before he was appointed as a Commons whip in September’s government reshuffle, Poynton told POLITICO: “That’s why I would encourage the secretary of state to use those powers carefully, including to approve projects like Rosebank and Jackdaw, because they support thousands of good jobs, particularly in Scotland and the north east, and they help ensure that what we do use is produced here to the highest environmental and safety standards.”   Miliband is also under pressure to approve projects from other figures on the left.   Green entrepreneur Dale Vince, who has donated over £5 million to Labour, says the government should “put its arms around the North Sea and support [oil and gas] operators with existing licences,” to ease the transition to clean energy. Greg Jackson, boss of the U.K.’s largest energy supplier Octopus Energy, and a green lobbyist who advises Labour ministers, says the government should back North Sea drillers in order to limit imports of gas from other countries. Domestic production “is cleaner and it reduces the backlash against climate policy. I’ve got no problem with it,” Jackson told The Telegraph at the start of this month.   Plenty in Labour’s ranks, though, would recoil from going soft on the mass-polluting oil and gas industry.    “The path to decarbonization, energy security and not being reliant on rogue states like Russia for our energy supply is dependent on a huge expansion of domestic renewables which will create jobs in the UK and exports as a world leader. Any other path is leaving us stuck in an early 20th century paradigm,” said Alex Sobel, Labour MP for Leeds Central and Headingley. “It is a simple truth that the North Sea basin is in terminal decline. … That is why this government are right to finally draw a line under new licensing and the illusion of endless new oil and gas,” veteran MP Barry Gardiner, a member of parliament’s Environmental Audit Committee, said this spring.  The Department for Energy Security and Net Zero declined to comment. ALL ABOUT THE BILLS Ministers know that voters, while broadly supporting Labour’s net-zero push, care much more about the state of the economy and sky-high energy bills.   Polling from Merlin Strategy, conducted last month, shows 58 percent of Brits say the government should reverse any climate decisions that have led to higher energy costs. Almost two in three think the government should prioritize reducing energy costs over protecting the environment.    “The key theme is people want lower energy costs as a priority,” said Julian Gallie, Merlin’s head of research.   However, Tessa Khan, director of green campaigners Uplift, argues that, given U.K. extractions are sold on the global market, there is no direct link between drilling and bills. “There is just no reality in which we can drill our way to energy security or energy affordability,” she said.    Donald Trump is also piling pressure on the government to change tack, describing North Sea oil as a “phenomenal” asset while speaking alongside Prime Minister Keir Starmer during his U.K. state visit last week. | Ian Forsyth/Getty Images The new powers are set out in DESNZ’s guidance on how to handle so-called scope three emissions — the pollution created by fossil fuels after they have been extracted and used elsewhere.  The High Court ruled earlier this year that scope three emissions must be considered in all future oil and gas developments.  The North Sea Transition Authority (NSTA) regulator insists there is no change from current arrangements. The Offshore Petroleum Regulator for Environment and Decommissioning (OPRED), the NSTA said, will assess the environmental impact of projects as before.   That involves a parallel process, where the NSTA assesses a project’s development plan while OPRED judges its environmental statement. The NSTA can’t sign off the development plan or grant drilling consent, though, until OPRED has completed its assessment. During the OPRED process, the environmental statement has to be signed off by DESNZ, effectively giving Miliband a mechanism to overrule the regulator’s recommendations.  That would give Miliband “in theory … lots of discretion to override regulator decision-making,” said Martin Copeland, chief financial officer at Serica Energy, one of the country’s largest oil and gas companies.    Paul de Leeuw, an energy expert at Aberdeen’s Robert Gordon University, called the guidance “pragmatic” and “timely,” adding it provides “the secretary of state with the powers to make a balanced and informed decision, reflecting a wide range of considerations.”  A second senior oil and gas industry figure — who has held talks with all major parties including the government and was granted anonymity to discuss sensitive lobbying — said they sensed “a split in government along the lines of environment and economic growth.”    There are fresh political pressures on Miliband just as these new powers take effect, the same person said.   “I think there has been winds of change blowing through Westminster in recent months. I think that’s due to a number of reasons. Obviously, the ‘Trump effect’ [backing aggressive fossil fuel drilling in the U.S.] is having a significant impact and it’s galvanizing the right. It’s galvanizing Reform and it’s galvanizing the Tories.”

LONDON — Since Labour swept into office last year, Energy Secretary Ed Miliband has traveled the country enthusing over the government’s dream of a humming, futuristic net-zero economy. The good news, according to polling released Wednesday, is that his vision still has the backing of the public. The bad news is that support is slipping — and voters aren’t convinced Miliband is the guy to deliver it. For Miliband’s political opponents, this validates their wider attacks on him as an out-of-touch climate warrior, flogging a net-zero dream voters have rejected. At Reform’s party conference Friday, party chair David Bull referenced “mad Ed swivel-eyed Milliband.” Not to be outdone, the Conservatives have vowed to squeeze every molecule of oil and gas from beneath the North Sea, deadly heatwaves be damned. But it also shines a light on a confusing feature of British politics: a misalignment between the stories politicians want to tell about efforts to stop climate change, and stuff the public actually care about. At Reform’s party conference Friday, the party chair David Bull referenced “mad Ed swivel-eyed Milliband.” | Leon Neal/Getty Images The polling, conducted by progressive think tank More in Common and the Climate Outreach NGO, found the number of people who think reaching net-zero emissions will be good for the U.K. vastly outnumber those who think it will have a negative effect — 48 percent versus 16 percent. More people feel that the shift to clean energy has been fair than unfair. In Scotland, more are proud of the offshore wind industry (63 percent) than the oil and gas industry (54 percent). “Those who seek to divide communities with climate disinformation will not win because they do not represent the interests or values of the British people,” Miliband said in a statement shared with the media. Despite this, voters are hesitant about the personal impact of a country rushing to go green. Seventy-four percent of people think the U.K.’s commitment to reach net-zero emissions by 2050 will eventually cost them money personally. The gap between those who think it will be beneficial for the U.K. versus harmful has shrunk by 20 points in only a year. This is frequently interpreted as a sign that a personal desire to help fix the climate is butting up against the hard realities of net zero, which requires changes like fitting millions of heat pumps and EV chargers and overhauling the energy grid. Further polling released by The Times Tuesday backs up the sense voters are growing more divided on climate change. It shows support for net zero collapsing among Reform and Conservative voters, while overall the issue has slipped from voters’ list of top concerns. But analysts from Climate Outreach said part of the problem isn’t the message but the messengers. “Politicians are not well trusted to speak about climate,” the NGO said in an analysis shared with POLITICO. In fact, elected leaders were the least trusted carriers of the climate message — beneath also-lowly ranked protesters and energy company executives. TRUST ISSUES Voter wariness about pro-climate messages isn’t a feature of green politics in particular, said Emma James, a researcher at Climate Outreach, but a symptom of broader public cynicism about government. “They don’t trust that politicians are there for people like them. Some audience segments feel that the system is rigged against them,” she said. It’s not net zero the public aren’t buying, it’s the ability of this government — or any government — to deliver it. Voters believe the NHS remains broken. National projects like high-speed rail lines and nuclear power stations keep being delayed at higher and higher costs. This creates a problem for Miliband. At a time of deep voter skepticism, his Department for Energy Security and Net Zero (DESNZ) is pursuing precisely that kind of major national project — involving upfront costs, disruption and complex trade-offs, with the promise of huge savings to private and public purses down the line. It will, Miliband argues, generate new jobs. Under Rishi Sunak, the Conservatives went in search of their own set of climate salespeople. | Carl Court/Getty Images “We will win this fight by showing the visible benefits of the clean energy transition,” insisted one Labour official, granted anonymity to discuss the government’s internal deliberations. The story of failure, however, is pervasive and self-reinforcing, said Richard Johnson, a political scientist at Queen Mary University of London. “Policy delivery has to be tied in with a compelling political narrative and the political leadership that can tell that story and interpret what people are seeing in front of their eyes,” he said. “I wonder now if there is such a high level of cynicism … that even if you did tell a compelling narrative around policy delivery, that people would not believe it.” Johnson lays the blame with Miliband’s boss, U.K. Prime Minister Keir Starmer, “who has been in a way almost catastrophically unable to put together a compelling narrative for his government. Or, quite frankly, even his own leadership.” Downing Street says it is focused on driving economic growth across the country. This is not isolated to Labour. Under Rishi Sunak, the Conservatives went in search of their own set of climate salespeople — before deciding that there was more political capital in ditching pro-climate policies. Climate Outreach said Miliband could turn this problem into an “opportunity,” as long as he laid off the grand projet and focused on the visible, local benefits of climate policies. And there is some evidence that Labour gets it, seen in the government’s move to chip in for the energy bills of people living in sight of unpopular new electricity pylons. The more conservative or skeptical parts of the British electorate still had deep enthusiasm for messages about protecting the environment, the pollsters said. But most important, the NGO argued, was bringing other voices into the frame. While politicians are viewed very dimly indeed, experts and scientists are seen as credible messengers, the polling shows. So too are those seen to understand what life is like for normal British people. Farmers were among the messengers who cut through most with traditionalists and those described by the pollsters as “patriots.” Jeremy Clarkson, DESNZ needs you.