Green 'stealth tax' attacked by business groupsUnited Kingdom
Larry Elliott and Juliette Jowit
Employers unimpressed by £1bn tax grab in spending review from energy efficiency scheme
Business groups lined up today to condemn a £1bn stealth tax on companies that have invested in a government scheme to drive down CO2 emissions.
The CBI and manufacturers' group the EEF both attacked the announcement, buried in the comprehensive spending review, that the Treasury would not pay back money to firms obliged to take part in the Carbon Reduction Commitment (CRC) energy efficiency scheme.
"Revenues... totalling £1bn a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants," the spending review said.
Under the scheme, which was introduced earlier this year, companies made upfront payments to the Treasury on the understanding that they would get the money back by reducing emissions.
Steve Radley, EEF director of policy, said: "If the private sector is going to play a greater role in increasing investment and growth it needs clarity. By changing the rules six months after the game has started and landing business with an unsignalled £1bn tax rise, the government has sent an unwelcome signal."
Richard Lambert, director general of the CBI, said: "This is not going to build trust. I have some cross members out there."
Lambert said that the CBI had been told by the Department of Energy and Climate Change that the £1bn levy on business was the price demanded by the Treasury for the go-ahead for the carbon capture and storage demonstration facility – which has also been awarded £1bn.
Chris Huhne, the Lib Dem climate secretary, denied the change was a "stealth tax", saying the old system was too complicated to work as an incentive for carbon reductions, and the money transferred to the Treasury could become part of the coalition's promised increase in "green taxes" as a proportion of the overall tax take.
"There was an awful lot of criticism from businesses of the amount of administration and compliance costs the CRC was imposing, with very little effect on carbon reductions," Huhne told the Guardian. One of the problems was that businesses did not know if they would qualify for repayments, so it was not acting as a motivation for investing in carbon reduction, he said.
Asked if the government should, instead, have earmarked the payments for other green initiatives, such as the green investment bank or the green deal for insulating buildings, Huhne said: "Sadly or otherwise the department is not separate from the rest of the government's problems: we can't deliver on our agenda unless we have a credible means of tackling the public deficit. The low-carbon recovery absolutely depends on the belief of businesses we'll not get blown off course, and that means we have to play our part in reducing the deficit."
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