A Conservative government would abolish the heavily-criticised climate change levy, shadow chancellor Michael Portillo announced last night.
Portillo made the statement in an address to the Chemical Industries Association, the FT reported today.
He said: ‘If we are to make Britain the best place in the world to do business, we will need lower business taxes and lighter regulation.’
The climate change levy, which taxes a company on its level of energy consumption, was first introduced by chancellor Gordon Brown in the Budget speech of 1999 and is to be implemented in April.
However it has been heavily criticised by prominent organisations such as the CBI, the Engineering Employers Federation and a large segment of UK businesses, which claim the tax will damage competitiveness in European markets, and taxes companies unfairly.
A recent EEF report said 2,300 UK companies would have to pay the levy in full, reducing their ability compete internationally for business. However the federation said it was not necessarily in favour of a total abolition of the tax, but would support changes that achieved environmental gains but not at the expense of manufacturing competitiveness.
The Tory’s pledge came as Britain’s largest steel manufacturer Corus announced it would not close its Llanwern carbon steel plant as had been expected. However the Anglo-Dutch company is expected to announce in the next few days job cuts totalling between 5,000 and 7,000 employees.
Talks between Tony Blair and Welsh Assembly first minister Rhodri Morgan held on Monday aimed at putting together a rescue plan for Llanwern seemed to have met with some success.
The Welsh plant is to stop manufacturing crude steel, but will continue with its sheet rolling operations. The move will save 1,300 jobs, but three other large UK sites – Port Talbot, Teeside and Scunthorpe – may all suffer capacity cuts.
The company reported a nine month operating loss of Pounds 92m, due to the depleted carbon steel market in Britain, competition from European industrials, and a the Euro/Pound exchange rate.
The conglomerate has also been hit with a flood of environmental bills, which has worsened its financial position. Last week it was reported that the proposed climate change levy would cost the steel industry Pounds 10m a year, with Corus having to pay the lion’s share. In addition Corus would have to fund a Pounds 40m upgrade of its operations to meet DTI environmental requirements. Over the next five years, environmental upgrades and taxes could cost the steel giant as much as Pounds 80m.
Added to these charges, the DTI has demanded Corus pay Pounds 800m in environmental clean-up costs at two of its plants.