The proposed energy tax on business will cost heavy industry hundreds of millions of pounds despite the Government’s insistence that the measure will be cash neutral, big energy consumers have warned.
They say the Government’s plan to recycle the tax with a 0.5% National Insurance contributions cut will not cover a fraction of their tax bills. `Our steel industry members are looking at paying £238m and getting £5m back,’ said Lisa Waters, economic adviser to the Energy Intensive Users’ Group.
She said discrepancies would arise in the other sectors: the chemical industry would pay £175m and receive £25m; paper £60m and £2.5m; and cement £40m and £600,000.
Don McGarrigle, electricity group chairman on the Major Energy Users’ Council, said he had yet to find a member who would not be seriously disadvantaged by the tax.
The Government claims the tax, called the climate change levy, will be broadly neutral, but Waters said that the public sector – hospitals, schools, offices etc – will benefit at industry’s expense.
It also emerged that the big power generators – the largest individual producers of carbon dioxide (CO2) and other damaging emissions – will not pay the tax, which will be levied on energy consumption rather emission production.
The generators will will not have to pay tax on the energy they use to produce electricity in order to avoid problems over double taxation. Electricity users will pay tax at 0.6p per kilowatt hour.
`This means there will be no incentives for them to improve efficiency,’ said Waters. `The whole thing is just a disaster area.’
She said another anomaly was that the 0.2p/kWh levy proposed for gas would make it cheaper to burn more polluting heavy fuel oil, which is covered by Customs & Excise duties.