December 1, 2013 9:27 pm

Industry near ‘crisis point’ over green taxes

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British industry has warned that green taxes are pushing it to “crisis point” even as George Osborne prepares to cut environmental levies on household energy bills in this week’s Autumn Statement.

Leading industrialists from companies such as Tata Steel and Ineos told the Financial Times that green taxes were putting their British plants at a competitive disadvantage relative to those plants’ European competitors. They urged David Cameron and his chancellor to extend their pledge to “roll back” the levies on households to manufacturing plants.

“We are at a crisis point,” said Tom Crotty, director of Ineos, the chemical company.

“We will not have an energy-intensive sector in this country in 20 years’ time; it will not exist. You already see chemical companies closing assets, steel companies closing assets. At some stage you need to take a decision and say, is that OK or is it not OK?”

On Sunday Mr Cameron promised households he would tweak green levies to save an average of £50 on domestic energy bills. He also pledged to offer homebuyers a grant of up to £1,000 to insulate their homes.

Heavy industry complains it has been largely ignored by the government, despite accounting for nearly as big a chunk of electricity consumption as domestic customers. The suspicion is that the government is taking a populist stance on household bills to blunt Labour’s attacks on the high cost of energy to consumers.

“Our UK manufacturing plants face electricity costs that are as much as 50 per cent higher than our key competitors in France and Germany,” said Karl Koehler, chief executive officer of Tata Steel’s European operations. “If the chancellor wants an industrial recovery and to rebalance the economy he must show real commitment to fair energy costs for foundation industries such as steel.”

Mr Cameron’s actions come as the Conservative leadership tries to clear away outstanding “micro” policies to focus on the Autumn Statement. This is expected to be one of the most optimistic for years, with the Office for Budget Responsibility set to announce the largest upgrade to government economic forecasts since the turn of the millennium.

Independent forecasts from the OBR will predict growth this year of close to 1.5 per cent, compared with the 0.6 per cent predicted in March. With the Bank of England expecting a 2.9 per cent expansion in 2014, the OBR will also significantly revise up the 1.8 per cent figure it predicted in the Budget.

The chancellor’s upbeat statement on the prospects for British business as economic growth takes hold is likely to be provoke scorn among energy-intensive companies struggling to cope with the burden of green levies.

Terry Scuoler, chief executive of the EEF, the manufacturers’ organisation, said failure to tackle the high burden of green levies could “result in less investment and job creation”. He said industry would feel “angry and let down” if that risk was not addressed in the Autumn Statement.

We will not have an energy-intensive sector in this country in 20 years’ time; it will not exist

- Tom Crotty, director of Ineos

Luis Sanz, managing director of Celsa Group’s steel business in the UK, said there was a real risk of plant closures.

Official estimates show that government policies on climate change are likely to add as much as 50 per cent to electricity prices paid by industry by 2020. Mr Osborne has put together a £420m relief package, spread over five years , to help offset the cost of environment taxes on heavy industry; but the relief is due to end in 2016.

A senior Treasury official dismissed the energy-intensive industries’ remarks as “lobbying” ahead of the Autumn Statement, but he also acknowledged that energy costs were high. Another Whitehall official told the FT that the government will announce this week that it will extend the relief scheme by a further year, to 2017. This is unlikely to placate industry, which wants a four-year extension.

The EEF has also asked the chancellor to exempt heavy energy users from the costs of renewable obligation certificates, which subsidise the generation of low-carbon energy. It estimates that requiring energy companies to source a certain percentage of energy from renewable sources adds £8.66 per megawatt hour to energy intensive bills, further widening the price differential between Britain and the rest of Europe.

But the more politically pressing need to blunt Labour’s attacks on energy bills appears to have put the needs of industry on the back burner, with the government preferring to reform domestic energy levies rather than commercial ones.

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