Chancellor told to ease energy cost pressure on businesses

A business lobbyist has told the government that energy costs must not be allowed to undermine the UK’s international competitiveness.

On 15 February the Confederation of British Industry (CBI) submitted to the government its view on the upcoming Budget, which will be announced by the chancellor later this month. It said the government needed to set out “globally competitive tax and regulation” for UK industries, balancing the need to limit carbon emissions against ensuring that companies were not disadvantaged. The CBI warned that, if UK companies faced too high a burden from climate policies, they may be undercut by foreign competitors who faced more lenient tax regimes.

The CBI’s first recommendation was that the current freeze on the UK’s unilateral carbon price support rate be extended, for at least one more year. It said that maintaining the tax without raising it would strike the required balance between encouraging low-carbon investment and protecting UK companies.

Easing administrative burdens

Secondly, the CBI recommended that two business energy efficiency schemes – the Carbon Reduction Commitment (CRC) and the Climate Change Levy (CCL) – should be combined, so that businesses found it easier and cheaper to comply with them. The CRC is an emissions reporting scheme for large public and private sector organisations, covering those emissions not already covered by formal national or international arrangements. The CLC is a tax on the electricity, gas or solid fossil fuels that are supplied to business customers.

The government is already considering this option as part of a review it is undertaking on the administrative burden faced by businesses in complying with climate change policies. The CBI said the move would represent a “sensible compromise” to balance the interests of investors and consumers. It recommended that a single, higher rate of the CCL be introduced for all businesses.

In addition, the CBI suggested that the government needed to provide a longer-term view on the trajectory of energy policy. This would require providing greater clarity on the level of subsidies that would be available for low-carbon development beyond the end of the decade.

Business groups are asking the government to be mindful of energy costs, but are also seeking a simpler policy regime that eases the costs associated with compliance.