Industry groups attack ‘green’ aspects of Budget 2000

Industry groups say environmental taxation measures contained in the UK Government's Budget for 2000 will endanger the international competitiveness of UK industry and inhibit growth in the aggregates industry, particularly in Scotland.

The Confederation of British Industry (CBI) has accused the UK’s Chancellor of the Exchequer, Gordon Brown, of endangering competitiveness by not extending exemptions to the Climate Change Levy (CCL) – the tax on industrial and business use of energy – to more industrial sectors.

Meanwhile, both the CBI and the Quarrying Products Association (QPA) say the Budget will inhibit the growth of the aggregates industry by passing over the industry’s proposals for a voluntary scheme. The QPA says that small quarries in Scotland will be particularly affected.

The CBI’s criticisms came despite plans to introduce a transitional discount on the CCL for the horticultural sector (see related story). The CBI says the size and the duration of the discount is less than for energy intensive sectors.

Brown’s adjustments to the CCL announced in the Budget include lowering the rate of the CCL on Liquified Petroleum Gas (LPG); making additions to the list of technologies eligible for capital allowance for firms investing in energy efficiency; the introduction of a transitional 50% discount on the CCL for horticulture firms for up to five years and the encouragement of the growth of the natural gas market in Northern Ireland by seeking its exemption from the CCL, also for up to five years.

Brown said the CCL, which will come into effect in April 2001, will raise around £1 billion in 2001/02 and would reduce carbon emissions by 5 million tonnes a year by 2010. A 0.3 percentage point cut in employers’ National Insurance Contributions and additional Government support for energy efficiency measures is intended to make the CCL revenue neutral for the private sector.

The Government will have to obtain clearance from the European Commission for the transitional discount for horticulture, the exemption for natural gas in Northern Ireland, and the additional technologies proposed for the capital allowances scheme.

Brown also announced that the Government will introduce a tax on aggregates in April 2002 (see related story). The tax is intended to address the environmental costs of quarrying and encourage recycling. Like the CCL, all revenues will be returned to business through a cut in employers’ National Insurance contributions. Brown also plans to launch a new Sustainability Fund to deliver improvements to the environment of communities affected by quarrying.

Responding to the Budget, Digby Jones, Director-General of the Confederation of British Industry (CBI), said that Brown had not gone far enough in helping industry with the energy tax. “He has failed to extend eligibility for sectoral negotiated agreements and this will hit manufacturers at this crucial time as they meet the challenges of global competition.”

A CBI spokesperson also told edie that the transitional discount for the horticultural sector was inadequate when compared to energy intensive sectors. “Out of the limited improvements in the budget, the 50% transitional discount for horticulture still hasn’t gone far enough. It’s unclear whether it is in return for energy efficiency targets, but if it is, the size and duration of the discount is less than for energy intensive sectors signing negotiated agreements.”

The Government’s decision to include an aggregates tax in this year’s budget is based on research which found that the average environmental cost associated with the extraction and transport of aggregates was around £1.80 per tonne. However, the aggregates tax will be introduced at a rate of £1.60 per tonne and giving firms two years lead before its introduction. It is estimated that the tax will raise around £380 million per year. The tax will be levied on imports but exports and recycled aggregates will be exempt.

Both the CBI and the QPA believe the introduction of the aggregates tax will inhibit the sector’s growth, although the QPA says the effect will be felt most in Scotland, where the additional tax could prohibit the purchase of the product, particularly by cash-strapped local authorities.

However, the main source of irritation for the quarrying industry is the fact that the Government had appeared to accept its proposals for voluntary measures, but only informed the industry of its plans to introduce the aggregates tax the day before the Budget. “We thought a deal had been reached,” Jerry McLaughlin, the QPA’s economist told edie. “We thought we’d dealt with all the issues that Government wanted us to and that we had a framework agreement. So far we’ve been given about three different reasons why the Government turned round and said no the day before the Budget, so I think that at the end of the day the Treasury just couldn’t be bothered.”

The quarrying industry wanted to introduce a system of environmental accreditation for quarries that would force quarries to improve their performance. “We’d got it all checked out legally,” McLaughlin said, “but I think the Treasury said ‘No, we’re not interested in using the public sector’s purchasing power in that way’ and pulled the plug on that basis. The whole point of the voluntary scheme was to look at the long term environmental solution. The aggregates tax won’t do anything environmentally because the sector isn’t very price sensitive – an extra £1.60 per tonne won’t make much difference to consumers. The Treasury will get plenty of cash out of it, whereas our measures were very much run on an environmental basis.”

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