£7bn to ease energy bill burden

George Osborne announced a £7bn package to reduce energy bills for manufacturers, with special support for the most energy-intensive industries.

He said the Government is “on the side of manufacturers... a Britain that makes things again”.

The move represents a victory of sorts for Yorkshire industrialists, who have been lobbying hard over the escalating cost and diminishing supply of energy, but questions have been raised over the effectiveness of the measures.

Mr Osborne is capping the carbon price floor (CPF), which sets rising amounts for the carbon tax paid by electricity generators.

The Government said it was committed to the CPF to stimulate investment in low carbon infrastructure, but will cap the support rate at £18 from 2016/17 to 2019/20 to limit any competitive disadvantage faced by British firms.

The move could save businesses up to £4bn by 2018/19 and a further £1.5bn in 2018/19, while shaving £15 off a typical household energy bill.

Compensation for energy intensive users for the cost of the CPF and EU emissions trading system will be extended to 2019/20, while a new compensation scheme will be launched.

Sheffield Forgemasters, Tata Steel, Outokumpu, Ineos, Sonoco and BASF are among the heavy energy users in Yorkshire to benefit from the scheme.

The Government said a typical energy intensive business in Britain pays almost 50 per cent more for their electricity than they do in France.

Mr Osborne said steel makers, chemical plants, paper mills and other heavy users make up 35 per cent of the UK’s manufacturing exports and employ half a million people.

He added that the compensation “helps the companies most at risk of leaving to remain in the UK”.

Tony Pedder, the Master Cutler, told The Yorkshire Post that the measures “look to be heading in the right direction”, but warned that there are still issues around energy policy and making sure the UK has enough generating capacity.

Heavy users have been switching off production at peak times of the day to avoid paying excessive electricity charges, a practice described by Tata Steel as “almost like a third world system”.

Terry Jones, a partner at accountancy firm BDO in Yorkshire, said the Chancellor’s reforms on energy are welcome but lack the flavour of fundamental change.

Representatives from the renewable energy industry raised concerns over the Government plans. Gordon Edge, a director at Renewable UK, said: “Although it was good to see the Chancellor specifically naming renewables as a way to cut our energy costs, the freeze in the carbon price floor will chill the mood of some investors in clean energy projects.

“The Chancellor introduced the CPF to stimulate green growth by penalising fossil fuel polluters. Now some of that growth will be lost, despite the Chancellor’s assertion that there will be no reduction in investment in renewable energy.”

The Confederation of British Industry said the UK’s energy intensive industries are crucial to building a low-carbon economy.

John Huddleston, a CBI spokesman in Yorkshire, said: “It’s right the Government is taking action to mitigate the cost for these firms.

“But many more businesses across the country are struggling with high energy costs and these measures will help support key sectors against tough international competition.

“We now need to see action from ministers to secure an ambitious EU-wide 2030 emissions reductions target to drive investment in our low carbon future.”