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date: 27 February 2008

embargo: 00.01hrs Thursday 28 February 2008

Windfall energy profit tax should pay for green budget

The TUC is today (Thursday) calling on the Chancellor to introduce a green windfall profits tax on energy companies and to use the proceeds to increase spending on tackling fuel poverty, improving home insulation and other environmental and job creating initiatives.

The call for a profits tax is based on the calculation by Ofgem, the energy regulator, that the electricity industry will benefit from a windfall profit of around £9 billion from the free allocation of tradeable emission permits over the four years of Phase II of the EU Emissions Trading Scheme (to 2012). This is on top of a previous DTI estimate of £800 million a year in extra profits to 2007 from Phase I of the scheme.

The TUC believes that this could make a major contribution to the Government's target of eliminating fuel poverty by 2010, which has been made more difficult by energy price rises that have led to more than four million households suffering from fuel poverty.

TUC General Secretary Brendan Barber said: 'These excess profits do not flow from investment, innovation or hard work but simply result from the way that carbon trading has been implemented across Europe. While carbon trading has a crucial part to play in tackling climate change, these windfall profits will give it a bad name unless they are used to fund socially useful and green spending.

'This should be the centrepiece of a green Budget which should show how the Government intends to implement the Stern Review's call for one per cent of GDP to be used to tackle global warming.'

The TUC's budget submission makes a series of further green recommendations:

• Air Passenger Duty (APD) should be fully indexed against inflation in the Budget, and allocated to stimulating green energy and green manufacturing initiatives. All of the APD revenues should be hypothecated to the proposed Environmental Transformation Fund.
• The Budget should include a commitment to produce an environmental balance sheet of green taxes and expenditure. Environmental taxes have fallen from 3.5 per cent of GDP in 2000 to 2.9 per cent in 1999. An assessment is also needed of the implications of Stern's target for the UK - that is, one per cent of UK GDP dedicated towards climate change mitigation and adaptation policies.
• The Budget should provide measures obliging suppliers to offer minimum standards of energy assistance
• The Government should identify new funding streams to boost the introduction of carbon capture and storage projects, and aim to host four of the 10-12 demonstration projects planned by the EU.

NOTES TO EDITORS:

- The full TUC Budget Submission will be published on Monday 3 March.

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Elly Brenchley T: 020 7467 1337 M: 07900 910624 E: ebrenchley@tuc.org.uk

Press release (600 words) issued 28 Feb 2008