Is CRC Vanishing Before Our Eyes?

When is a stealth tax not a stealth tax? When it’s a really really stealthy tax…  s0 stealthy, in fact,  that it creeps off into the night and dies.

It may be  a bit early to say this is what is happening to the government’s CRC energy efficiency scheme, but it’s showing all the signs of terminally sick legislation, beset with U-turns, postponements, promises and excuses.

CRC wasn’t the coalition’s idea, originally. As a way to help the country meet the demands of the Climate Change Act, which says the UK must reduce its emissions, the Labour government proposed a scheme which would be revenue neutral.

The biggest companies would have to sign up for the scheme, buying credits according to how much energy they used. Each year, the number of credits available would go down, like a game of musical chairs, and the companies who reduced their energy most would get back the money they put into the scheme.

Enter the stealth tax

That was before austerity struck. Maybe it was absurdly optimistic to expect a scheme like this not to become a source of revenue. In any event, when the country had to tighten its belt, that is exactly what happened.

When the government’s Comprehensive Spending Review came out, the Department of Energy and Climate Change, virtually overnight, removed the “revenue recycling” element from CRC, turning it into a “stealth tax” – or as DECC preferred to call it, a “green” tax.

Some green lobbyists were actually pleased – a green tax was what they had wanted, and was simpler than the over-complicated CRC scheme. Even before the change, CRC looked like a disaster, as most people didn’t understand it, and a vast number of companies missed the registration deadline, risking £45,000 fines.

But businesses were outraged. Overnight their budgets had been changed so companies that expected to pay £1 million into the scheme suddenly had to find £10 million.

DECC explained that the change was made necessary by its own budget cuts. Raiding the money in the CRC scheme would give the government an extra £1 billion a year by 2014 – and without this, DECC said it would probably not be able to fund essential green developments like wave power and clean carbon capture.

Could the green tax stifle green companies?

But some businesses pointed out that DECC’s moves, which allowed it to continue funding national green initiatives, were indirectly putting at risk the sort of green activity it wanted to encourage in other organisations.

“We were planning to take the money we got back from CRC, and plough it into green activity,” one company told a colleague. “Now we have to ask the board for that funding – and the answer is pretty obvious given the general outlook.”

Even then, the CRC U-turns were not over. Last week, DECC announced the whole scheme was being postponed, and would be simplified further.

On one level, this is a positive response to those – including British Gas – who asked for an extended deadline to the original CRC scheme.

But many see it as something more. The coalition government may have promised to be the “greenest government ever”, but it is led by a Conservative Party which is constitutionally in favour of reducing taxation, and susceptible to lobbying from big businesses, who will try anything to remove this extra cost.

I want to see something like CRC in place – but I believe that during the year’s delay, it will probably be so watered down and eroded by business interests, that what remains is so ineffective we might as well have no CRC at all.