CBI chief attacks Government over energy policy

John Cridland says the Coalition's attempts to promote low-carbon energy are actually having a detrimental effect on UK growth...

by Emma Haslett
Last Updated: 19 Oct 2011
The Coalition may be keen to beat the drum about a ‘Made in Britain’ manufacturing revival, but John Cridland, the recently installed director-general of the CBI, seems to think that, in terms of energy policy, it's actually doing more harm than good. In a speech on Tuesday, he said some of the Government's main initiatives are actually undermining competitiveness for energy-intensive industries – some of which are crucial to low-carbon energy production in the UK. In its desperation to raise the tax revenues it needs to cut the deficit, Cridland argues, it's offering the wrong incentives to businesses to cut emissions – and that could be entirely self-defeating...

Cridland reckons that two of the Government's flagship energy policies – the Carbon Reduction Commitment (the cap and trade scheme aimed at cutting the UK's emissions), the Carbon Floor Price (a mechanism to prop up the carbon price, thus making low-carbon investment more appealing) are too complicated and are making it too expensive for manufacturers to operate here.

He cited the example of chemical company Ineos, which has already said its Runcorn-based chlorine plant could become uneconomical after the introduction of the carbon floor price, while Tata is apparently having similar problems. Since these firms make the lubricant and the blades that power our wind turbines, driving them out of the UK would be counter-productive, to say the least. He also criticised the £2bn North Sea oil and gas levy, which has already caused Centrica to abandon its Morecambe South production field.

So what's the answer? Well, Cridland thinks that there should be a higher 'trigger price' for natural gas producers. And he reckons that certain industries should be exempt from the carbon regulations. ‘At a time when rebalancing of the economy needs UK manufacturing to be playing a bigger role, energy-intensive industrial users need more help,’ he said. Rather than the big stick of taxation, businesses need the carrot of incentives, he suggests – so energy-intensive manufacturers should be given rebates depending on their success in cutting emissions.

It wasn't all bad news for the Government: Cridland says the CBI supports the carbon floor price in principle, and he thinks it's on the right lines with the Green Investment Bank, which he believes will attract attention from pension funds. But if the Government is serious about boosting growth in the low-carbon energy, he says, it needs to stop shooting itself in the foot by hammering manufacturers in a bid to raise tax revenue...

- MT and the CBI are joining forces on 28 June for the Business Summit 2011 – a day-long event that will focus on how we can boost growth in the UK economy. You'll be able to hear from Cridland, plus contributions from the likes of Autonomy's Mike Lynch, Hays boss Alistair Cox, Co-op Group CEO Peter Marks, the TUC's Brendan Barber, Ignite chairman Harvey Goldsmith. Cabinet Office Minister Francis Maude, small business minister Mark Prisk, and of course MT editor Matthew Gwyther. Click here for more details.

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