CBI/EEF: Energy tax ‘flawed’

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Manufacturing News, Source : The Manufacturer
Published : 22 Nov 2002 14:21

TAXATION: Climate change levy makes ‘mockery of government commitment to manufacturing’

Business leaders have criticised the “flawed design” of the government’s new energy tax, which they say has damaged the competitiveness of more than half the UK’s manufacturers. On 1 November, the Confederation of British Industry (CBI) and the Engineering Employers Federation (EEF) joined forces to publish their first report on the impact of the controversial Climate Change Levy and called for it to be significantly improved. The levy - blamed at a recent meeting of The Manufacturer’s Manufacturing Alliance as being a significant reason for the relative uncompetitiveness of Britain’s factories - is intended to encourage firms to use energy more efficiently. Revenues are mainly returned to business through reductions in National Insurance Contributions.

However, the new report shows it leaves some firms with huge bills while others are better off, regardless of whether they have taken measures to improve energy efficiency. Manufacturing, which paid out an extra

£143 million in the first year of the tax, has been worst hit. Manufacturers saw energy costs rise by

£328 million but received back only £185 million.

Fifty seven per cent of manufacturers said they were less competitive as a result. While the report concedes that the levy is encouraging changes in energy use in some sectors, the results are patchy, it says.

CBI director general Digby Jones said: “This government was not elected to create unemployment in manufacturing areas and that is precisely what the Levy has achieved. It has become a great friend to our French and Spanish competitors.”

At the EEF, director general Martin Temple believed the levy made “a mockery of any commitment to support manufacturing”, making the Government’s new manufacturing strategy look increasingly worthless.