Energy tax anomalies will cost firms £95m, says EEF

The Chancellor’s refusal in his pre-Budget report to tackle anomalies in the climate change levy will cost energy-intensive manufacturing companies more than £95m a year, according to figures released on Wednesday by the Engineering Employers’ Federation.

The UK Chancellor’s refusal in his pre-Budget report to tackle anomalies in the climate change levy will cost energy-intensive manufacturing companies more than £95m a year, according to figures released on Wednesday by the Engineering Employers’ Federation.

The EEF commissioned Ernst & Young to conduct a survey of all the UK manufacturers which have annual energy bills of over £100,000 but no access to the 80% discounts available through negotiated agreements because their processes are not covered by the Integrated Pollution Prevention and Control regulations.

The survey found 2,298 out of just over 3,000 firms would be net losers, after taking the 0.3% national insurance reduction into account, and that these companies face an increase in their bills totalling just over £95m.

Even taking the ‘winners’ into account, the sector faces a total extra cost of over £81m. ‘We think it confirms what we’ve been saying all along,’ said Paul Reeve, head of environment at the EEF.

The government’s use of the IPPC criteria has also thrown up some anomalies. In the motor industry, for example, energy efficient technologies such as metal sintering are not covered by the regulations while older —and more energy intensive — ones are. ‘This will result in an unfair, and somewhat perverse distortion,’ said the EEF.

The government has indicated it will address these anomalies individually once the tax is in place, but Reeve said this approach would be highly damaging for the manufacturing sector because companies would be unlikely to invest in a climate of uncertainty.