British manufacturers have accused the Government of failing to shield them from the full weight of its green taxes, leaving them at a disadvantage against European rivals.
George Osborne had promised a £250 million annual subsidy to big energy users to protect them from the worst effects of the Government’s green taxes.
But the aid package has been delayed by the European Commission, which is considering whether it amounts to unfair state aid. Industry leaders fear it could take months to be implemented and will not be backdated.
The complaints come as the final reading of the Energy Bill in Parliament this week risks degenerating into chaos, amid concerns over the security of power supplies and confusion over new tariffs for consumers.
Heavy industry such as steelmakers and chemicals companies has been hit by the Government’s Carbon Price Floor tax, under which they are charged £16 per ton of carbon emitted for fuel used for power generation. This price floor will increase every year, to reach £30 per ton by the end of the decade – an average of £1.1 million per company.
The tax, which applies only to UK firms, is in addition to payments incurred under the European Emissions Trading Scheme, which aims to reduce greenhouse gases. Under it, factories and power stations must reduce carbon output or face heavy fines.
The Carbon Price Floor became operational on April 1 and the Chancellor promised heavy industry the £250 million package to provide some cushioning. But the package has yet to be cleared by the EC. Nicholson said: ‘This is a UK-only measure. European industry is not affected.’
The Government said the scheme was still going through the EC. ‘It is considering whether the payment ought to be backdated. We expect to publish guidance later this year,’ said a spokesman for the Department for Business Innovation & Skills.