Climate Change Levy flawed says UK business

1 November 2002 – The Confederation of British Industry (CBI) and the Engineering Employers Federation have attacked the government’s Climate Change Levy (CCL) as “flawed”, claiming that it has damaged the competitiveness of more than half the UK’s manufacturers.

In a survey, 57 per cent of manufacturers said the levy had made them less competitive, compared with just 28 per cent of service sector firms.

The levy is charged on businesses uses of energy and was supposed to be revenue neutral as it was to be offset by a 1 per cent reduction in companies’ National Insurance contributions. However, this was quickly discovered to benefit companies with a higher employee to energy used ratios.

It appears that rather than calling for the tax to be scrapped the groups want to see it ‘significantly improved’. Joining forces for the assault the two organisations have published a report which it says shows that some firms are left with huge bills while others are better off, regardless of whether they have taken measures to improve energy efficiency.

The report says that the worst affected has been the recession-hit manufacturing sector which paid out an extra à‚£143m in the first year of the tax. Manufacturers saw energy costs rise by à‚£328m but received back only à‚£185m.

Digby Jones, CBI Director-General, said: “This survey shows the Climate Change Levy is damaging key sectors of the UK economy and driving jobs abroad. It’s crazy to pile on extra costs when manufacturers are struggling to remain competitive, and all employers are bracing themselves for next April’s increase in National Insurance Contributions. A laudable objective has been tarnished by inept implementation. This government was not elected to create unemployment in manufacturing areas and that is precisely what the Levy has achieved. It has become a great friend to our French and Spanish competitors.”

Engineering Employers Federation director Martin Temple said that retaining the CCL in its current form would make a “mockery” of the government’s commitment to help manufacturers.

The CCL, introduced in April last year, is designed to help the UK meet its commitment under the Kyoto Agreement to reduce harmful greenhouse gas emissions. Friends of the Earth defended the levy saying that it was an important part of the fight against the impacts of global warning and that some sacrifices were inevitable.

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