Coalition edges towards a compromise deal on green levies

25th November, 2013

Downing Street has rejected claims that David Cameron described environmental levies as “green crap” as the coalition explores ways to minimise the impact of green subsidies on household energy bills.

The prime minister is said to have used the dismissive language to describe the state subsidies which pay for renewables and help the poor cut their fuel use.

The Sun newspaper quoted an unnamed source saying: “The prime minister is going round Number 10 saying: ‘We have got to get rid of all this green crap’.”

Officials said they did not “recognise” the phrase but emphasised that the prime minister had repeatedly promised to roll back to green taxes with an announcement expected in next month’s autumn statement.

The fact that Mr Cameron did not directly deny having used the “crap” phrase underlines how far he has put his one-time green credentials on the back burner to focus on the “cost of living” row.

Officials and ministers are currently locked in talks over precisely how to “roll back” certain green levies to reduce bills while keeping others firmly in place.

Five of the big six energy suppliers have hiked fuel bills over the past month, with many blaming the increasing burden of funding government green policies.

But the coalition seems to getting close to a compromise deal. The main schemes now in the firing line are the Warm Home Discount and the Energy Company Obligation (ECO), which both require the big six power suppliers to pay for insulation of low-income homes.

The current favoured option is to shift the Warm Home Discount into general taxation, which would see bills come down by about £11 a year.

At the same time the ECO could be shifted from bills to taxation. Or it could stay on bills but be substantially revamped so that it costs energy companies less – enabling them to voluntarily rein back their price increases.

That revamp could involve extending the deadline for the Big Six to deliver their Eco obligations by at least a year from the current final deadline of spring 2015.

The Tories and Lib Dems are also both open to adjusting the balance of the different elements of Eco. At present more than half of the spending must go on solid wall insulation, which can cost close to £10,000 per home.

The big six have lobbied hard to shift the balance back towards cheaper measures such as cavity wall insulation and replacing ageing boilers. If they get their way on this, they will be able to turn to consumers and announce that bills aren’t going to rise by quite as much as people had thought.

That is the theory, anyhow. Ministers will want a private agreement from the Big Six that this would be enough to get the positive headlines they need on the day after the autumn statement before they proceed with such a complex revamp of an existing government programme.

Source: Blogs

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