News analysis UK spending review


Greener land?


Britain’s long-awaited Comprehensive Spending Review has been unveiled, but what do the cuts mean for the sector? Carina Bailey reports


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UK Chancellor of the Exchequer George


Osborne has revealed how his Comprehensive Spending Review will cut £81bn from public expenditure between now and 2014-15. Currently, Britain is borrowing


one pound in every four that it spends, and every day its debts are costing the country almost £120m in interest, according to the coalition government. Despite this, Osborne claimed


that the government will increase spending on capital projects by £2.3bn a year by 2014-15 after a review of projects highlighted the coalition’s existing contractual commitments.


Carbon reduction scheme Many of the measures announced were expected. One of the biggest surprises to industry, however, was the coalition’s decision to turn the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) into a carbon tax. The CRC is a carbon trading scheme targeting businesses and organisations that are large energy users. Under the original scheme, organisations had to buy carbon credits in advance, relative to how much energy they consumed. The cash generated was to be redistributed back to the companies involved, with a premium for the best performers and a penalty for the worst. However, the cash collected


will now be kept by government, generating £1bn a year for the public coffers by 2014-15. According to the CSR, the first purchase of credits will now be delayed by one year to 2012. David Fairbrother, environmental


director at developer Land Securities, is surprised by the


16 CIBSE Journal November 2010


timing of the announcement. He said: ‘We’ve already implemented the measures to take advantage of the recycling payments – which is now a waste of time and money. Essentially we’ll lose over £1m in the first year. ‘But, having taken away the recycling league table, we are hopeful that this will open up routes to discussions for clarifying the CRC scheme even further and making it a true beneficial trading mechanism.’ Currently, the scheme leaves the


landlord or building owner liable to pay for its tenants’ energy use, rather than making the polluter pay. Paul Edwards, head of sustainability at property giant Hammerson, also sees the


Companies that are large users of energy have been affected by the changes


ring-fenced and used for green initiatives, in particular for those businesses that have to pay the tax. David Frise of contractors’ body


the HVCA described the change to the CRC as ‘just what many in the industry have been asking for’. He added: ‘This is one of


those be-careful-what-you-wish- for moments. People have been pleading with the government to simplify the CRC – well, it is certainly simpler now. A tax on consumption


[Under the CRC change] companies can


now plan initiatives knowing the cost to business – Paul Edwards


changes to the CRC as potentially positive. ‘It would be unusual for any company to celebrate a new tax,’ says Edwards, ‘but by converting the complicated CRC system to a tax from 2012, the coalition government has simplified the whole system in one quick move. This has removed a huge administration burden. Companies can now plan initiatives knowing the cost to the business and therefore generate a cost benefit analysis.’ Edwards compared the approach


as being similar to the landfill tax. He is now awaiting the detail of the scheme, but believes it will be a positive move that will reduce carbon in the long term. However, he stressed he would prefer to see the money generated from the tax


will push up the price of energy, so creating the ultimate incentive to save it.’


Renewable Heat Incentive Industry has largely expressed relief that the government has finally committed financially to a Renewable Heat Incentive (RHI), although the funding allocated to it is 20% – or £105m a year – less than was originally mooted. In total £860m has been set aside to incentivise renewable heat over the spending review period. The RHI will be introduced in 2011-12. A spokesman for the


Federation of Environmental Trade Associations (FETA), which represents manufacturers, said


it was delighted that that RHI will go ahead because it ‘offers a level of certainty to the emerging renewable technologies sector’. And manufacturer Mitsubishi Electric believes the RHI will open the way for air-source heat pumps to be used more widely in homes. The government has chosen to


derive funding for the RHI through general taxation, rather than adopting the original proposals for a levy on fossil fuels used for heating. This has been welcomed by the Combined Heat and Power Association (CHPA), which feared the levy risked penalising a range of groups – from consumers in fuel poverty through to intensive energy users in industry – who were unable to access renewables. Graham Meeks, director of the


CHPA said: ‘It is very encouraging to see that government has addressed the concerns of many across the energy sector. ‘Now that the RHI has been


confirmed, we need to move quickly to clarify details of the scheme. There are many important biomass CHP schemes in development, but the uncertainty over the future of the RHI has caused most of these to be put on hold.’ Key details are expected to be


published before the end of the year. However, there are signs that the Feed-in tariff scheme, which allows anyone generating electricity to sell it to the grid at a premium rate, has not escaped unscathed. The government says the FiT will


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