Why the government will need to cut more “green crap” to save British industry
The pressure for the government to cut more green levies is growing, ahead of next week’s Budget.
Major trade bodies such as the Confederation of British Industry, the manufacturers’ organisation EEF and the Institute of Directors have already warned that charges such as the carbon price floor – that taxes fossil fuel emissions – are making the UK uncompetitive against industries abroad.
Energy and business minister Michael Fallon made a speech yesterday in which he hinted that the government would look at “other policy costs” on suppliers and manufacturers, to avoid widening the competitiveness gap between Europe and the US.
Chancellor George Osborne is rumoured to be planning to freeze the carbon price floor in his Budget statement next Wednesday, although this may not be enough for some critics.
City analysts Macquarie said as long ago as last October that the tax, which was introduced last April, is “counterproductive from an environmental, economic and taxation point of view and therefore unsustainable” and “will increasingly affect market behaviour by 2020”.
“It’s hard to see an upside to the policy,” a spokesperson for chemical company BASF previously told City A.M. “It’s essentially a tax on manufacturing. Without the compensation we are facing a five per cent rise in our energy costs, as are most of our customers.”
The tax is passed through to customers’ bills, which gives the Chancellor another incentive to roll it back, while the cost of living debate rages on. The government already reduced some green levies back in December, cutting around £50 off the average household energy bill.
"Effective carbon pricing, including the carbon price floor, is an important part of the government’s energy policy. Establishing a minimum carbon price sends an early and credible signal to help drive billions of pounds of investment in low-carbon electricity generation,” an HM Treasury spokesperson told City A.M. via email.
“However, ensuring UK industry remains globally competitive is a priority and government acknowledges that rising energy costs is a key issue for many businesses. This is particularly true given the lower than expected European carbon price.”
With jobs (and the next election) at risk, it seems unthinkable that Osborne won’t amend this particular green tax next week.