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The BBC's Jonathan Beale
"The Conservatives are building a strategy to win the business vote"
 real 28k

Shadow Chancellor, Michael Portillo
"The tax is likely to drive businesses away from Britain"
 real 28k

Treasury Minister, Stephen Timms
"Michael Portillo hasn't done his homework"
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Thursday, 31 August, 2000, 09:43 GMT 10:43 UK
Tories would scrap energy tax

The Tories want to scrap Labour's climate change tax
Shadow chancellor Michael Portillo has committed the Conservatives to scrapping Labour's planned climate change levy designed to protect the environment from pollution caused by business.

Mr Portillo argues that the tax will threaten up to 150,000 manufacturing jobs and could cost business 1bn a year.

Portillo's plans
Scrap climate change levy
Revert the WFTC to a benefit
Less regulation for small business
Review of IR35
New 'red tape budgets' for government
But the government says the tax, which has been criticised by business leaders for being over complicated and unfair, will reduce carbon emissions by five million tonnes a year by 2010.

Environmentalists say the announcement leaves the Conservatives reputation on green issues "in tatters", but Mr Portillo says moving to gas powered power stations and considering emission permit trading is the way forward.

Labour is bringing in the climate change levy next April to help meet its commitments set out in the 1997 Kyoto summit on the environment.

The Conservative announcement comes a day after environmentalists warned that a third of the world's habitats were under threat due to effects of climate change and global warming.

Business 'no longer the fall guy'

Speaking at a business breakfast in London on Thursday Mr Portillo said: "There is no justification for an energy tax which is going to be particularly harmful to manufacturing industry.


Mr Portillo's claim that the levy will make no serious contribution to international obligations is simply wrong

Friends of the Earth
"Somebody has got to turn the tide and say that business can no longer be used as the means of applying extra taxation to the British economy.

"Business can no longer be the fall guy."

But speaking to the BBC earlier, Mr Portillo confirmed that he would not go through with the cut in employers' National Insurance contributions that the government plans to introduce to compensate industry for the new energy tax.

Michael Portillo
Micheal Portillo: Reducing the burden for business
Responding to the announcement, financial secretary to the Treasury Stephen Timms said all the expert advice was that the tax represented the most effective way of tackling the problem.

He also said the levy would raise around 1bn a year which would go back to business in the form of reduced National Insurance contributions.

Speaking for Friends of the Earth, climate campaigner Mark Johnston said Mr Portillo's plans would "put in jeopardy" pollution cuts of up to four million tonnes annually of greenhouse gases.

"Mr Portillo's claim that the levy will make no serious contribution to international obligations is simply wrong," he said.

And the Liberal Democrat environment spokesman, Don Foster, said the Tory proposal would mean the loss of the opportunity to tackle the problems of climate change, to reduce pollution and to improve energy efficiency.

Help for small businesses

The decision to scrap the energy tax was just one of a raft of initiatives unveiled by Mr Portillo, who also announced a series of new policies designed to appeal to the business community.

The package, entitled Keeping Britain Competitive, includes plans to save business 100m a year by changing Labour's Working Families Tax Credit back to a benefit. This would see the administration of the scheme go back to government, thus saving business money.

Other measures include a 10-point plan to simplify the VAT system for small business.

'Red tape budgets'

Another proposal is the introduction of `red tape budgets' - with ministers given targets for reducing the total regulatory bill their department imposes on business.

Mr Portillo said: "Businesses are struggling under an extra 5bn a year in taxes and an extra 5bn a year in red tape imposed by this government.

"This Labour Government is actually undermining the competitiveness of the UK economy. Our measures are aimed at reducing burdens on business.

Turning to the political battles looming in the future, Mr Portillo added: "There's more to come. We will establish our plans for public spending and our plans for taxation and we will announce these in time for the election.

"I will aim to produce a series of tax reductions that reflect the needs of business but also encourage people to save and I want to see tax reductions that encourage marriage and tax reductions that do something for the hard working families and the pensioners."

Speaking for the Federation of Small Businesses, Ian Handford was pleased by the Conservatives' package, saying the proposals were "specifically aimed at reducing the burden on the small business sector".

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See also:

16 Jun 00 | Sci/Tech
UK warned of climate disaster
10 Mar 00 | Budget2000
Labour's patchy green record
01 Sep 99 | The Economy
EU energy tax moves nearer
23 Jul 99 | The Economy
Energy levy 'will cost 155,000 jobs'
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