The proposed energy tax

In the March 1999 Budget the Chancellor announced that a ‘climate change levy’ on the business use of energy will be introduced from April 2001 and that the revenue will be recycled to business by means of a cut of half a percentage point in the main employers’ rate of national insurance contributions. (This will, of course, favour labour-intensive rather than capital-intensive industries.)

Different rates will apply to different fuels, and the details will be set out in next year’s Finance Bill. The levy will apply to gas, coal and electricity used by business, agriculture and the public sector for energy uses. It will not apply to fuel which is used by the domestic or transport sectors, or which is used for electricity generation or non-energy purposes. Neither will it apply to oils, which are already subject to mineral oils duty.