In his Pre-budget report the chancellor effectively indicated through changes in tax rules that he would increase the cost of UK manufacture of essential basic materials for the construction of wind turbines, solar panels, photovoltaics, insulation and advanced thermal glazing. The argument being that this would save energy and reduce CO2 emissions.
The flat and fibre glass industry in the UK makes products which everyone knows, apart from the chancellor it seems, go into products which either reduce energy consumption or actually generate green, renewable electricity. Without these products, listed in the UK Low Carbon Transition Strategy, it is impossible for the UK to meet its own targets and those it is pushing others so strongly for at Copenhagen. Yet in his Pre-budget report the chancellor has just increased the cost of manufacturing these products in the UK, preferring it would seem that customers source these materials more cheaply outside the UK and allowing the UK government to claim that the UK has reduced its own carbon emissions.
Like all UK businesses the flat and fibre glass sectors pay the Climate Change Levy. Because energy intensive industries (EII) would be shut down if they had to pay the full tax (you can’t melt sand without energy!) glass and other EIIs qualify for an 80% relief if they meet the government agreed, tight, energy reduction targets. Glass has consistently done this for nearly ten years despite continued target tightening. After the 2004 review, targets in practice became aspirational, so they purchased carbon credits thus diverting money into the carbon trading markets for others to take advantage of where it is actually possible under the laws of physics to make such savings. Despite this financial haemorrhage the UK flat glass industry invested heavily to produce the coated glasses needed to meet the new mandatory building regulations to combat climate change and now they are trying to invest in the production of essential low iron glasses for solar applications.
The chancellor’s Christmas gift in this Pre-budget report has been to drop the tax relief from 80% to 65% without apparently a thought for the consequences either from the point of view of UK employment or ultimate carbon reduction. Across the glass industry this means that each year the whole of UK glass manufacturing will have to find another £2.25M. Key climate change manufacturers, flat and fibre glass will have to find getting on for another £1M each year. The timing of this change coincides with the proposed increase in national insurance costs. If UK industry can pass these costs on, it will put the cost of these products up for the people who are being encouraged by the government to install them. The result being that if customers won’t buy them at UK prices then inevitably there will be more imports and more carbon leakage. It is one thing for the country to boast about being green but not if it is merely shifting its manufacturing carbon emissions abroad!