Energy tax row flares up

Adispute blew up this week between a group of Cambridge economists and heavy users of energy about the likely impact on industry of the Government’s so-called energy tax. A report from Cambridge Econometrics dismissed industry claims that the proposed climate change levy will cost thousands of jobs. Instead, it said, it will lead to a […]

Adispute blew up this week between a group of Cambridge economists and heavy users of energy about the likely impact on industry of the Government’s so-called energy tax.

A report from Cambridge Econometrics dismissed industry claims that the proposed climate change levy will cost thousands of jobs. Instead, it said, it will lead to a net gain of 14,000 jobs in the UK in 2002, the first full year of the energy tax.

Cambridge Econometrics analyst, Charlie Hargreaves, said: `What’s perceived to be an overall threat to the UK economy isn’t as bad as it’s made out to be. Instead there will be considerable benefits to the economy.’

But as a Commons committee inquiry into the energy tax took evidence this week, the Energy Intensive Users Group warned that the tax could cost over 50,000 jobs. Lisa Waters, economic adviser to the group said half of her association’s industry groups had estimated they would lose 28,000 jobs as a result.

Although the Cambridge Econometrics report admitted that the manufacturing sector generally would lose more from the energy tax than it would gain from the national insurance rebate, it argued that unit costs would increase by less than 1% in most cases.

Chris Hewett, research fellow at think-tank the Institute for Public Policy and Research, said that industry had overstated its case. `Just a small number of intensive users will face heavy costs,’ he said

But Waters at the Energy Intensive Users Group said that between 10 and 15 large manufacturers with single UK sites had told her they would move their operations offshore if the tax proposals were implemented.

Patricia Hewitt, Economic Secretary to the Treasury, admitted the tax would not be fiscally neutral. She told the committee that the Treasury would derive a net benefit of between £100m and £150m.

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