Energy tax changes `not enough’

UK manufacturers are warning they could shift production elsewhere in Europe unless there are further changes to the Government’s energy tax proposals – despite concessions outlined in Chancellor Gordon Brown’s pre-Budget statement. Helen Woolston, the Engineering Employers’ Federation’s environmental adviser, said the threat had come from some of the UK’s larger manufacturers with operations on […]

UK manufacturers are warning they could shift production elsewhere in Europe unless there are further changes to the Government’s energy tax proposals – despite concessions outlined in Chancellor Gordon Brown’s pre-Budget statement.

Helen Woolston, the Engineering Employers’ Federation’s environmental adviser, said the threat had come from some of the UK’s larger manufacturers with operations on the continent. She said the tax would cost one EEF member £5m a year.

The lobby group welcomed the energy tax changes, which include a cut in the tax rate per KW hour from 0.21p to 0.15p, 100% capital allowances for investment in energy efficiency technology and exemptions for renewable and combined heat and power schemes.

But EEF director-general Martin Temple warned that the less energy-intensive users, and many small and medium-sized manufacturers, would still be adversely affected. `We will pursue our case with the Chancellor for an extension to negotiated agreements,’ he said.

The concessions also failed to satisfy the heaviest energy-consuming industries – steel, chemicals, aluminium and cement – which led the opposition to the original proposals.

Lisa Waters, economic adviser to the Energy Intensive Users’ Group, said while the concessions were welcome, the proposed tax would still not be revenue neutral for most EIUG members. This was likely to invalidate provisional sectoral agreements to reduce emissions, she added.

Woolston said the proposal to tax companies at a flat rate on each unit of energy consumed could cripple the competitiveness of small and medium-sized manufacturers. `We’re trying to get across that smaller firms will suffer just as much as the public sector,’ said Woolston.