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Climate Levy `will cost engineering more than £200m`

01 October, 2001

Climate Levy `will cost engineering more than £200m`

The Climate Change Levy is likely to cost the British engineering sector more than £200m annually in increased energy bills, according to a report by the Engineering Employers` Federation. The EEF says that even when the accompanying reductions in National Insurance contributions are taken into account, the net increase in costs is likely to exceed £100m.

The EEF figures are based on a survey of 550 member companies which were quizzed about their energy bills in the three months following the imposition of the Levy in April. Based on this data, the EEF estimates that the engineering sector is paying 17% of the revenue raised by the Levy - well above its 8% share of the economy.

"Our figures prove that the Government was wrong to say that the levy would not impact on competitiveness when, in reality, it is imposing an ever-greater burden on manufacturing at a time when it is already in recession," says EEF director-general Martin Temple.

As well as conducting the survey, the EEF has also published an analysis carried out by Oxford Economic Forecasting looking at three alternative formats for the Levy. The most promising of these would be to scale down the size of the Levy, abolish the NI reduction, and channel the revenue raised into incentives to invest in energy-saving equipment, such as variable speed drives and high-efficiency motors.

Temple argues that the alternative proposals would achieve a balance between reducing carbon emissions and promoting growth in employment and output. "They provide a basis for a fairer and more effective levy, with the carrot equal to the size of the stick," he says.

Although the EEF supports the need to cut carbon emissions, it is critical of the Climate Change Levy on several grounds, including the failure to use the revenue raised to provide sufficient incentives to invest in energy efficiency.

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