Energy tax sparks row.

The Treasury has refused to give in to opposition demands that combined heat and power schemes will be free of energy tax, despite expectations that it would concede the issue. And financial secretary Stephen Timms made it clear to the Finance Bill committee that it is chancellor Gordon Brown’s intention to increase the energy tax in line with inflation. The row came as environment secretary Michael Meacher announced only those CHP schemes with a Quality Index of 100 or more will qualify for total exemption on all heat and power generated and used on site or sold directly to other users. Meacher made it clear those scoring less would be entitled to only partial exemption from the climate change levy. He also announced small-scale schemes of two megawatts or less will be subject to simplified monitoring arrangements. Details are to be spelled out in a formal response to the consultation exercise on CHP schemes ‘shortly’. Liberal Democrat Andrew Stunnell failed in a bid to re-write the new tax and base it on the carbon content of the energy supply for domestic or commercial and industrial use, insisting that provision to help the poor could be made through state support. He demanded: ‘We should not go for the complexity of the plans in their current form when there is a simpler alternative of the carbon tax.’ Timms said the government was determined not to impose new taxes on domestic fuel consumption and add to poverty affecting five million households. Tory MP David Heathcoat-Amory said the tax was too complicated and unnecessarily hit the competitiveness of some industries because the Kyoto commitment to reductions in greenhouse gas emissions could be met by moves towards natural gas combined with voluntary agreements with industry. Heat was also generated by protests that the industry had been misled by Timms about CHP exemption.

Related reading