CIA backs Tory energy tax move

Chemicals Industry chiefs have given a cautious welcome to Conservative plans to scrap the Climate Change Levy if elected to government.

Announcing the policy last week at the Chemical Industries Association’s business outlook conference in London, Shadow Chancellor Michael Portillo said the CCL was ‘unwieldy, irrational and damaging to the international competitiveness of industry’.A Tory government would introduce an emissions trading scheme with targets to reduce overall releases of greenhouse gases, he added.

The CIA’s chief economist, Keith Wey, welcomed Portillo’s commitment to scrap the CCL, but sounded a note of caution. ‘We’re reserving judgement on emissions trading, as we are not entirely satisfied by the proposals,’ he said.

The government is planning to introduce an emissions trading system next year to run alongside the CCL, but is planning to cap total emissions, rather than insist on a reduction per tonne of production, said Wey.

‘We don’t want to substitute one set of penalties for another, so we’d like to see the Opposition’s proposals,’ he added.

The CIA is part of the Emissions Trading Group, which is advising the government on the scheme, and is lobbying for ‘relative targets’ that take into account industrial growth.

The CCL, which comes into force in April, will introduce a charge on industry, based on the amount of energy used. The tax is designed to be ‘fiscally neutral’, as it will be balanced by cuts in National Insurance contributions and rebates for industries that improve their energy efficiency.

But many companies believe the tax is disproportionate, as it penalises large energy users with relatively few employees.

Portillo said research by the Engineering Employers’ Federation found that 2,300 firms employing more than 1.3 million people ‘would together be hit to the tune of £100m’.

He also repeated his opposition to the UK joining the euro. ‘It would reduce our ability to respond to changing economic conditions,’ he said.

But the chemicals industry overwhelmingly supports the euro. ‘We need to be sure that the convergence criteria have been met,’ Wey said, ‘but we see many advantages, such as reduction in exchange rate costs and reduced cost of capital, which can only improve our competitiveness.’

Stephen Timms, financial secretary to the Treasury, said Portillo’s energy tax proposal would leave a £1bn hole in the Tory’s tax and spending plans. ‘This is yet more proof that the Tories’ sums just don’t add up,’ he said.