Budget statement welcomed amid continuing fears over energy tax

The Chancellor’s pre-Budget report was broadly welcomed as a move in the right direction by UK industry this week. But doubts remain over the scope of the energy tax and the need to encourage investment. Most heavy users of energy will lose less than anticipated after Gordon Brown announced a 29% cut in the proposed […]

The Chancellor’s pre-Budget report was broadly welcomed as a move in the right direction by UK industry this week. But doubts remain over the scope of the energy tax and the need to encourage investment.

Most heavy users of energy will lose less than anticipated after Gordon Brown announced a 29% cut in the proposed climate change levy and 80% rebates for sectors with energy efficiency agreements.

The steel industry, one of the UK’s largest electricity users, had been expecting an annual bill of £60m. That has now been cut to £15-20m. A spokesman for the UK Steel Association said: `Can we live with it? Of course not, it’s a huge additional cost.’

The Engineering Employers’ Federation expressed surprise at the Chancellor’s move, which follows one of the most intensive lobbying efforts by industry during the past decade.

But the EEF will continue to campaign on behalf of firms which do not have efficiency agreements, and still face large tax bills. Aerospace and medium-to-heavy engineering companies are likely to be hardest hit.

`From now on the best response should be to invest more in energy efficiency,’ said Paul Reeve, EEF head of environment.

Other well-received proposals included tax changes to benefit investors in small businesses and concessions for employee share owners.

Companies are also expected to be given 100% first-year capital allowances for investing in environmentally friendly technologies.

The Machine Tool Technologies Association said the report had some positive features, but would not stimulate investment. `I am deeply disappointed that the Chancellor has again missed an opportunity to help manufacturing,’ said MTTA president Mike Legg.

An end to the automatic fuel price escalator was welcomed by the Confederation of British Industry and the British Chambers of Commerce. But the BCC warned that competition from firms with access to cheaper foreign fuel would disadvantage UK industry.

* Energy tax, p3; Leader comment, p12