David Cameron’s new energy minister has attacked an “absurd” new green tax brought in by the Coalition for wasting people’s money.
In a meeting with business leaders, Michael Fallon laid into the Treasury’s Carbon Floor Price, which will start driving up the price of electricity for households and businesses from Monday.
Official figures suggest it will add around £5 to energy bills this year and about £50 a year by 2020.
On top of this, the taxpayer will have to give £150 million in compensation to factories that could be put out of business by the high costs of the levy – the equivalent of £6 per household.
Mr Fallon, a business minister who was yesterday given extra responsibility for energy, suggested this situation was “absurd”.
At the Centre for Policy Studies event last month, he said everyone “would have to pay” for the unintended consequences of the tax.
A recording obtained by the Telegraph shows he told businesses: “We’ve inherited this Carbon Floor and I am now to find, thanks to the Treasury, over £150 million to design a compensation scheme for energy-intensive industries precisely to compensate from this arrangement which we’ve inherited from our predecessors.
“This is a fairly absurd waste of your money, this situation we’re now in. Governments intervene in markets they don’t understand and there are consequences and we all have to pay for those consequences.”
The introduction of the Carbon Floor Price was a Conservative policy championed in the party’s election manifesto, the Coalition agreement and this year’s mid-term review .
The point of the tax is to persuade energy companies to produce their electricity from green sources, like wind power and nuclear plants, rather than high-carbon fossil fuels.
At the moment, industrial companies in Europe have to buy a permit for every tonne of carbon dioxide they produce under the EU emissions trading scheme.
However, the Treasury is going one step further with an extra supplementary tax per tonne of carbon dioxide emitted.
Energy companies will not swallow the extra costs of the Carbon Floor Price themselves, but will pass them on to households and businesses through electricity bills.
Because the tax only applies to British companies, there are fears that heavy industry will leave the UK and move abroad.
This is why ministers have announced their £150 million scheme to subsidise the energy bills of some factories that are in danger of being put out of business.
Asked whether Mr Fallon now backs the Carbon Floor Price, a spokesman for the Department of Energy said that he “wants Britain to lead the way to a low carbon economy whilst making sure that the UK’s energy intensive industries remain competitive”.
Caroline Flint, Labour’s shadow energy secretary, said it is a “huge embarrassment for David Cameron that the man he has just appointed as energy minister is criticising his own energy policy”.
“Worse still, Michael Fallon does not even seem to realise that the Carbon Price Floor was a Tory manifesto pledge,” she said. “Michael Fallon needs to make clear whether he still thinks the policy he is now in charge of is an ‘absurd waste of your money’.”