Energy minister admits not enough has been done to protect industry from
rising prices that are making the UK uncompetitive
By Emily Gosden
Heavy industry will be granted more relief from rising energy costs in an
attempt to tackle the “clear and present danger” of job losses, Michael
Fallon will pledge on Monday.
The energy and business minister will admit that costs are undermining the
UK’s competitiveness and that current compensation for manufacturers is
failing to offset the growing burden of green levies on energy bills.
“Existing compensation and exemptions are not enough. We should look at
relief from other policy costs,” Mr Fallon will say, indicating that
further measures are likely to be unveiled in the Budget next week.
“Without further action on energy costs the competitiveness gap between
Europe and the US is becoming unbridgeable,” he will warn.
The Chancellor, George Osborne, is expected to announce in the Budget a
freeze of the UK’s unilateral carbon price floor, a rising tax on burning
fossil fuels that is pushing up power prices for industry and consumers
alike. However, a rumoured freeze at 2015-16 levels would still be almost
quadruple present levels.
Manufacturers’ group the EEF has called for further measures to help
industry, including extending both the duration and scope of exemptions
from green policy costs.
It says that manufacturers should be exempt from paying the renewables
obligation (RO) and small-scale feed-in tariff levies, which subsidise
green energy projects such as new wind farms and solar panels.
Ministers have already promised industry exemptions from a new system of
green energy subsidies that will replace the RO, so are thought to be
sympathetic to applying this principle to the existing schemes.
The EEF also wants a current two-year compensation package for the costs of
European and UK carbon prices to be extended until the end of the decade.
While £28m has already been paid in compensation to 53 different companies
for the costs of the EU Emissions Trading Scheme, promised compensation for
the UK carbon tax has been delayed pending EU state aid approval.
Speaking at the Edison Electric Institute’s International Utility
Conference, Mr Fallon is due to say he expects the state aid approval to be
granted “shortly”.
He will say: “Energy is one of the biggest costs for business, and a key
factor in investment decisions. We have to recognise that energy costs are
undermining our competitiveness; some energy-intensive sectors are
struggling to compete internationally.
“The risk to jobs in the steel and chemical industries is now very real.
There is a clear and present danger that we could lose jobs in these
foundation industries just when we are beginning to see other jobs
reshoring to the UK.
“Next week’s Budget gives us the chance to underpin our commitment to
manufacturing.”
Last month, the EEF revealed that energy costs were the top worry for
industry about operating in the UK.
The organisation’s chief executive, Terry Scuoler, warned that the costs
were “a major threat to growth”.
“The UK cannot afford to pile even more unilateral costs on the
manufacturing sector, which is key to developing the UK’s longer-term
growth and stability,” he said.
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