New energy tax 'will hit Labour heartland hardest'

Traditional engineering industries in Labour's political heartlands will suffer most from the Government's new energy tax, an employers' group claimed yesterday.

Traditional engineering industries in Labour's political heartlands will suffer most from the Government's new energy tax, an employers' group claimed yesterday.

The Engineering Employers' Federation (EEF) has compiled figures showing that some companies stand to lose more than £400,000 a year as a result of the Climate Change Levy.

The main burden of the tax, which starts next year, will fall on companies with large energy bills but proportionately few employees - particularly large manufacturing and engineering businesses, the EEF said.

In contrast, government departments - which use little energy but employ many people - would benefit because of reductions in national insurance payments under the tax, the federation said.

The measure means that companies are taxed on the amount of energy they use. It has been introduced by the Government to meet world emissions reduction targets.

The EEF undertook a survey in mid-June of 25 Sheffield companies with energy bills higher than £100,000 a year to see what effect the tax would have.

It found that the worst affected companies included a plastics moulding firm, with 3,000 employees, which stood to lose £437,000, or £145.67 per employee; a heat-treatment company with 116 employees that would lose £50,600, or £436 per employee; and a forging company with 200 employees that would lose £88,600, or £443 per employee

An EEF spokesman said: "This tax continues to be badly thought out and ill-prepared and will fail to achieve the Government's objective of reducing urban carbon dioxide emissions." The tax as it stood was "punitive" rather than encouraging companies to reduce emissions, he said.

The shadow Chancellor, Michael Portillo, said the cost to businesses of the new energy tax would serve only to make British industries less competitive.

"The EEF's survey of engineering manufacturing companies in Sheffield shows that Labour are piling extra costs on to manufacturing business at a time when they can least afford it," said Mr Portillo.

"The environment won't benefit if the energy tax makes British producers lose business to others overseas whose environmental standards are often lower."

A spokesman for the Department of the Environment, Transport and the Regions said negotiations were still taking place with industry to agree discounts in exchange for energy-saving measures.

"Energy-intensive companies can get an 80 per cent discount if they sign up to a target for energy reduction, and this is being negotiated sector by sector," he said.

The Government did not expect to make any money from the tax as the revenue raised would go into reducing national insurance contributions and generating energy-efficiency schemes, the DETR spokesman said.