George Osborne should use his Budget this month to scrap an environmental tax that will add more than £500 million to household energy bills, Britain’s leading consumer champion says today.
In a rare intervention in tax policy, Which? calls for the Budget to abandon the carbon floor price, a central plank of the “green tax” agenda.
In a letter to The Daily Telegraph, Richard Lloyd, executive director of Which? describes the measure as “an extra and unnecessary burden on hard-pressed customers” that will do nothing to help the environment.
He says that the Government cannot “write a blank cheque” on behalf of consumers to pay for tackling climate change.
The call by Which? is the latest sign that political opposition to environmental taxes is spreading beyond long-term critics of the green agenda.
The Chancellor last year signalled his own doubts about environmental levies, and watered down some tax rules. Senior Conservative MPs want him to go much further in the Budget on March 21, arguing that climate change levies are hampering an economic recovery.
The carbon floor price policy sets a minimum on what British companies must pay for the greenhouse gases they produce under the European Union’s emissions-trading rules.
The measure, due to be in place next year, is supposed to increase the financial incentive for big firms – especially power generators – to adopt low-carbon technologies. However, the policy has been criticised as ineffective and unfair, because companies elsewhere in the EU will not face a floor price.
Even the Government admits that much of the floor price charge to UK companies will actually be paid by consumers as firms recoup their costs through higher bills.
The Treasury estimates floor price will raise £1.4 billion by 2015/16. The Government estimates that at least 40 per cent of that bill will be paid by households, a total cost of £560 million
Treasury estimates suggest that the floor price will add as much as six per cent to household electricity bills, an additional £25 for the average family.
In his letter, Mr Lloyd said the policy amounts to ministers “writing a blank cheque” with households’ money.
“People are already struggling to manage their energy bills. It is unacceptable for the Government to pile yet more pressure on household budgets,” he wrote.
A decision by the Chancellor to abandon this “unnecessary measure” in the Budget would “send a clear signal that consumers are at the heart of the Government’s energy policy without having a detrimental impact on investment in future low carbon generation.”
The Conservative-led Energy Select Committee recently concluded that the floor price will mean no reduction in net carbon emissions because production will rise elsewhere in the EU.
The policy is “in effect a tax on UK business with little environmental justification”, the MPs said.
Nick Clegg, the Deputy Prime Minister, yesterday took a swipe at Mr Osborne over his rhetoric on green measures.
“Some say we have to choose between boosting growth and being green. What a load of rubbish,” Mr Clegg said.