Small and medium sized firms that have invested in a government scheme to reduce carbon emissions are to be charged a £3.5bn green “stealth tax”, according to reports.
Business leaders have expressed anger that the chancellor, George Osborne failed to mention the tax during his announcement of the Comprehensive Spending Review (CSR) on Wednesday.
The Confederation of British Industry (CBI) and manufacturers' group, EEF, have attacked the coalition government for not making clear in the CSR that changes to the Carbon Reduction Commitment scheme (CRC) would mean that the Treasury would not pay back money to companies obliged to take part in the scheme.
Steve Radley, EEF director of policy, told the Guardian: "If the private sector is going to play a greater role in increasing investment and growth it needs clarity. By changing the rules six months after the game has started and landing business with an unsignalled £1bn tax rise, the government has sent an unwelcome signal."
Under the scheme, which was introduced earlier this year, businesses were encouraged to make upfront payments to the Treasury on the understanding that they would get the money back by reducing emissions.
According to government figures, the change will cost UK businesses nearly £3.5bn in revenue for the Exchequer between 2011 and 2015, with costs rising to £1.02bn a year in 2014/15.
Edward Craft, Partner at City law firm Wedlake Bell, said: "The CRC is now nothing more than a green tax introduced through the back door, but with the hugely expensive data collection and reporting requirements of a carbon trading scheme.
"Businesses face the worst of both worlds: they will have to administer an extremely bureaucratic scheme but won't receive the promised benefits for reducing energy consumption."
© Crimson Business Ltd. 2010