Lib Dems determined to ride out storm over green energy levies

Nick Clegg and Vince Cable dismissed any Tory plan to slash subsidies for renewable energy projects as “short-sighted” yesterday, despite confirmation from Number 10 that a review is now under way of green levies on household bills.

The levies were blamed by energy giant Scottish and Southern Energy (SSE) for its 8.2 per cent hike in bills earlier this week, with chief executive Alistair Phillips-Davies suggesting it is now “time to retreat from decarbonisation, and focus on the cost of living”.

Official figures, however, show the various green levies form less than 10 per cent of a household’s annual bill. Nonetheless, the Prime Minister’s spokesman indicated the levies were under review, with the Government looking “across the board” at ways to reduce pressures on household finances.

“You would expect us, when family budgets are under pressure, to be looking at whether more can be done to help,” Number 10 said.

Mr Clegg insisted a nuanced approach will be taken, with the part of the green levy that supports new industries such as offshore wind – known as the Renewables Obligation – protected, but others potentially up for review.

“There are different green levies,” he told the Yorkshire Post. “First is what is called the Renewables Obligation... it would be very short-sighted to change that, and there are no plans to do so.”

The Deputy Prime Minister said he was “not going to rule out” other levies changing, but added: “The fundamental basis on which we have designed our policy – that we need a contribution from people’s bills to keep the lights on and invest in the infrastructure of the future – that is something we are not going to suddenly U-turn on.”

Earlier in the day, Business Secretary Mr Cable said scrapping environmental policies would be “very short-sighted”, as he reiterated his backing for offshore wind. The industry is expected to create thousands of manufacturing jobs in Yorkshire over the next decade.

He said: “If you are taking a long-term view about shifting the British economy on to a less polluting system, we have to provide those incentives. In the long term, the costs of renewable energy will fall.

“We’ve already seen this with solar power, it’s beginning to happen with offshore wind. We are investing very heavily in it. Britain is the largest offshore wind sector in the world, and the more we do, the more costs will fall.”

The Tory approach to green levies has hardened over the past week following Labour’s pledge to freeze energy prices in 2015.

David Cameron repeatedly attacked Labour’s commitment to green energy while on a visit to Yorkshire on Thursday. He set out his firm opposition to introducing a new target for Britain to use entirely carbon-free electricity by 2030 – something pushed for by both Labour and the Lib Dems.

“If you’re going to take all the carbon out of all our electricity, you’re going to have to close down a large number of power stations and put something else in their place,” the Prime Minister said.

“That is why people estimate there is a £7.5bn cost of decarbonising our electricity, which would add £125 to people’s bills.

“So it is I think incredible to say you’re going to freeze prices on the one hand, but you’re going to have a decarbonisation target on the other. I don’t think we should have another new decarbonisation target.

“I think the priority needs now to be to look at all the ways we can take the pressures off bills, rather than put fresh pressures on.”