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At Last: UK Chancellor To Review Green Energy Subsidies

Elizabeth Rigby and Jim Pickard, Financial Times

George Osborne will on Wednesday announce a review of green energy taxes and subsidies in an effort to reassure consumers that the government is trying to tackle high energy bills after Britain’s competition watchdog concluded that millions of people are paying over the odds for their energy.

The chancellor is expected to use “get tough” language about the need to cut the cost of green initiatives, which have accentuated rising bills in recent years.

Industry and government figures told the Financial Times on Tuesday that the chancellor was preparing to review existing business energy levies.

He is also set to drop the previous coalition government’s policy of increasing the proportion of tax raised from environmental levies — a commitment that also featured in the Conservative manifesto five years ago.

Industry executives expect the chancellor to signal his desire in the longer term to cut the amount consumers are funnelling into renewable energy schemes through their energy bills.

The “levy control framework”, used to subsidise wind farms and other low-carbon energy — including nuclear power stations — is expected to reach £7.6bn a year by 2020, adding further pressure on household bills.

“In the longer-term, we will take this budget down,” confirmed one official on Tuesday. Mr Osborne is expected to initiate a review of the levy control framework beyond 2020, with the final level of subsidy likely to be announced next year.

A promise to extend the subsidies further after 2020 would provide reassurance for nervous energy investors, who are increasingly alarmed at the anti-wind farm rhetoric from Tory MPs. The government recently promised to halt subsidies for new onshore wind farms in a move that delighted the Tory grassroots.

The chancellor’s review on business energy levies will focus on policies such as the carbon floor price — a charge on electricity generated from fossil fuels — and the climate change levy, a tax on energy delivered to non-domestic energy users.

The review of green taxes and subsidies underlines David Cameron’s shift away from longer-term environmental goals during his time in office.

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