Osborne to cut red tape on green tax
Author: Jim Pickard, Financial Times |
George Osborne is set to announce this week that he is cutting the bureaucracy surrounding a £1bn green tax but has ruled out scrapping the levy, known as the carbon reduction commitment.
The chancellor said in the spring Budget that he would either revise or scrap the CRC, which is levied on all companies with energy bills of more than £500,000 a year.
Mr Osborne cast the move as part of his wider attempt to reduce the burden on business against a backdrop of difficult economic circumstances.
However, he is expected to announce in Wednesday’s Autumn Statement that rather than replace the CRC he will amend the scheme.
Mr Osborne is also expected to give tax breaks to companies hoping to carry out “fracking”, the controversial process of extracting shale gas that was halted last year after the technique triggered two earthquakes in Lancashire.
The chancellor indicated at the autumn Tory conference that the fledgling industry would need a lighter tax regime than that used for North Sea oil if it was to grow.
Mr Osborne is also expected to set up a body, Ofshale (Office for Shale Gas), to oversee the industry and allay concerns from environmentalists.
These details are likely to be included in a “gas strategy” from the government that will lay the ground for more gas-fired power stations to provide energy for decades to come.
The future of the carbon reduction commitment has been the subject of a spat between some of Britain’s largest business groups.
Mr Osborne had said in the spring that if he scrapped the levy he would have to replace it with another system that raised the same amount of money, making the move revenue-neutral.
The CBI had argued that the levy should be spread over many more, smaller companies, prompting anger among business groups such as the British Chambers of Commerce and the Engineering Employers’ Federation. They feared that their members would see a much higher “climate change levy” on their energy bills.
One industry source familiar with the Treasury’s thinking said Mr Osborne had decided it was not worth angering thousands of smaller companies to please the 2,100 covered by the commitment.
Instead, he is expected to cut the bureaucracy surrounding the levy to strip out some of the more complex elements of the tax.
The government’s own estimates suggest that the typical member pays more than £30,000 on the CRC’s administrative costs in the first year alone.That amounts to some £97m of bureaucratic costs across the scheme, the figures suggest.
The chancellor is expected to say he will approve a system that is less confusing and costly for companies to operate.
Mr Osborne has often described the CRC as an invention of the previous Labour government, although in its previous incarnation it allowed companies that cut emissions to make a financial gain. Only after the general election did the coalition reform the scheme to be entirely punitive.
The EEF said the Treasury should not “tinker around the edges” and should change the eligibility criteria to exclude companies covered by the climate change agreement, a separate deal under which companies can cut their emissions to get discounts on the climate change levy.