Energy tax which will cripple industry

PETER HUGHES, chief executive of Scottish Engineering, says the Climate Change Levy is a threat to manufacturing

THE manufacturing engineering sector looks like slowly emerging from recession as companies throughout the country see a reversal in the downward trend of order intake, and whilst we are experiencing lowest interest rates for some time we are certainly not celebrating but we are more optimistic than we were a few months ago.

The Scottish manufacturing engineering industry sector includes many companies who are at the top table in terms of world class performance, a position they have fought to achieve and will fight hard to maintain. Against that background, the last thing they need are further Government burdens. The proposed Climate Change Levy is a typical example of ill- considered legislation with a potential to seriously harm our manufacturing sector both in terms of competitiveness and the resultant knock-on effect on jobs. This levy, or indeed to give it its proper name "Energy Tax" was introduced by the Chancellor in his last Budget under the guise of helping Britain, via the Kyoto Agreement, achieve its commitments with regard to greenhouse gas emissions. Unfortunately, the proposals as they currently stand will do little to minimise these greenhouse gas emissions. Let me explain briefly. By placing additional cost burdens on British manufacturing, thereby making it less competitive, we will drive business into the hands of other countries who are less committed to environmental measures. This could in fact have the net effect of actually increasing the greenhouse gas emissions globally. The Treasury claims that the "Energy Tax" in the region of #1.75 billion, will be revenue neutral, this supposedly being achieved via a 0.5% reduction in National Insurance contributions. The calculation is based on an increase of 0.6p per kilowat hour for electricity and 0.21p per kilowat hour for gas and coal. These extra costs are planned to hit the industry in April of 2001. A GROWING number of Scottish Engineering member companies have calculated that they will be significant losers in this situation. We are being inundated with complaints as companies recognise how they will be penalised under this new tax. Already several companies have discovered that they will lose in excess of #100,000 per annum as a result of this tax and indeed one member company has identified that it will lose more than #300,000. To give just one example, Sheffield Forgemasters Rolls who have a facility in Coatbridge and specialise in the production of large cast steel rolls, have calculated that their energy bill will increase by #210,000. In return, they will receive National Insurance contribution reductions totalling #8,000, resulting in an additional overall cost to the company of #202,000. It is unfair to expect the manufacturing industry to absorb such increased taxes, particularly since they will adversely affect our overall competitiveness. It is pointless to have the Government claiming to be business friendly, claiming we need to be more competitive and yet giving us even more tax burdens. The Chancellor has been known to lecture the manufacturing industry on productivity, although his figures are hideously complicated and far from convincing. Such Government activities merely add to the workload of the hard- pressed manufacturing engineering industry which is already trying to come to terms with numerous pieces of workplace legislation emanating from Brussels and Westminster - particularly Brussels. What really creates the burden for us is the fact that so much of the legislation is merely putting a bureaucratic gloss on what we in this country are already doing in the workplace. Without doubt there are rare instances of bad practice, but the vast majority of our companies have a human resource policy which is either up to world class levels, or they are positively working to achieve this standard. As soon as you start to legislate for practices which are currently being carried out then you load the company with costs in management time and in money.

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