Business Minister questioned on carbon floor price, capital allowances and Enterprise Zones.
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One of the biggest concerns for the manufacturing industry from the latest entries to the Red Book was the carbon floor price, set at £16 per tonne now and £30 per tonne from 2020. The UK is the first country to set a tariff and the end price could be almost double what companies in other countries – those that will use the EU ETS system – will pay.
Mr Prisk said the carbon floor price is a “good way for the energy sector to provide a clear signal…so that investors have chance to adjust to their investment plans over the next few years” and that its introduction must be considered in conjunction with an increased discount in the climate change levy from 65% to 80% and the reduction in corporation tax to an eventual 23p. However, he conceded that this “doesn’t wholly deal with the problem” and said a joint strategy team between the Department of Business, Innovation and Skills, the Department for Energy and Climate Change and the Treasury will now look to work with manufacturers to help them find ways to bring their energy spend down, including through the adoption of new forms of energy generation.
He pointed to Rio Tinto Alcan in Northumberland where he recently visited. The company has begun to use wood pellets to source some if its supply which benefits from being cheaper, better for the environment and carrying less secondary tasks – like cleaning transportation – than coal. It also offers no loss in the ability to control the energy source.
Mr Prisk recognised that despite the raise in short life asset capital allowances from four to eight years there is still a disparity with other European countries in the time that it takes to write down equipment which falls outside of this bracket. He said the government has sought to balance the short term issue within its overall aim of simplifying the whole corporate tax system. What’s more, he says government will have exceeded many people’s expectations in this area. “Most manufacturers will by 2014 still find themselves enjoying relief,” he said. “Many were concerned that our changes would remove that.”
The minister was enthusiastic about the 21 new Enterprise Zones nationwide, an increase on the 10 zones proposed originally, where companies will get reduced business rates and simpler planning arrangements. Having worked on the regional scheme as a surveyor in the 1980s, he said he has seen firsthand the benefits they will bring and will allow “areas that have fallen behind a chance to catch up.” He said government will be working with local enterprise partnerships to determine exact locations and that capital allowance needs – and by proxy manufacturing – will be a key consideration.
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