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Renewable heat incentive: uncertainty lessens a bit

Posted by Cathy Debenham on 21 September 2010 at 4:12 pm

Chris Huhne admitted that he and Oliver Letwin had forgotten about the renewable heat incentive when they were drafting the coalition agreement - and so take some responsibility for the uncertainty around it. He also said "we see heat as being an absolutely essential part of meeting our renewable targets". Mr Huhne was speaking at the oral evidence session to the energy and climate change committee on the work of the department for energy and climate change on 15 September. Below are extracts of the transcript:

Chris Huhne: Yes. I accept, obviously, that we must try and reduce those uncertainties as much as we can.

On dealing with your first point on the renewable heat incentive, I think I have to take a bit of the blame for some of the uncertainty on that because, having been involved in the coalition negotiations, we produced such a detailed list of all of the things that we wanted to see on the environmental, energy, climate change agenda that, as you know, it was extremely rushed when we were doing the coalition negotiations and I think Oliver Letwin, on the Conservative side, and myself literally forgot to put the renewable heat incentive in. As a result, people have turned round and they have seen this enormous detail on everything else but, "Why isn’t the renewable heat incentive in there?" And I have been trying to be as clear as I possibly can, since taking the job, that we see heat as being an absolutely essential part of meeting our renewable targets. It simply will not be possible to meet the 15% target without heat. So there will be a heat part of our renewable strategy. Again, it is subject, I am afraid, to the comprehensive spending review so announcements, in terms of the detail, have to await the outcome of that. But I think it is absolutely essential and I think the Treasury understands that.

Q13 Chair [Tim Yeo]: Just on that point about the relationship between this and the comprehensive spending review, why does the Treasury take an interest in incentives whose cost is borne by consumers rather than taxpayers?

Chris Huhne: The Treasury view, and I don’t mean by that the old 1930s Treasury view of fame but the current Treasury view, is that they should be concerned about taxable capacity. They take the view that, if a legislative charge is imposed on consumers through the levy system, then, in effect, this has an equivalent effect to a tax. It isn’t a tax, but it has an equivalent effect to a tax and might therefore limit their taxable capacity in some other area. This is obviously an ongoing debate and there are other views about the importance of this particular point.

Q14 Chair: I am glad there are other views. It sounds like a typical Treasury power grab to me. It has got nothing to do with them at all. There are all sorts of other things that might be taken into account on that sort of argument-indeed, the revenues they might receive from the jobs that are created if these incentives are put in place for various types of renewable energy. We would give you as much support as possible in seeing the Treasury off on that particular issue. It really does not seem to me to have anything to do with the CSR at all, and it would be extremely damaging to the whole prospect of reaching our renewable energy target if they are allowed to try and influence the levels at which these consumer paid for incentives are actually set.

Photo: DECCgovuk

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Comments

2 comments - read them below or add one

Cathy Debenham

Cathy DebenhamComment left on: 8 October 2010 at 10:32 am

The argument - and I don't endorse it! - is that if utility bills go up, there's less money to spend (and be taxed) so it is the Treasury's business. Not really satisfactory, but they do seem omnipotent!

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Mark Brown

Mark BrownComment left on: 7 October 2010 at 9:38 pm

This is very interesting as it answers a question I have raised before on the YouGen Blog but didn't seem to get any answer. The question was why, if the RHI is funded by the Utiltiy companies selling non-renewable energy to people, does the Treasury care about it? Why is it even being considered under any spending review if the UK Government and UK Taxpayer isn't paying for it? Well, as Tim Yeo MP rightly point out it is simple a "power grab". For some odd reason the UK Treasurey thinks that, because the Utility Companies need to levy the monies off fossil fuels, that this means that the Treasurey is somehow blocked from adding its own Carbon Taxes. This is ludicrous! This can only suggest that the Treasurey somehow think that they will raise the Tax anyway off Fossil Fuel users but then NOT return it to Renewable Energy users. Hence the investment tap will be turned off. Instead the cash goes to pay off the deficit. Well, do you know what I think? Keep the RHI and let the Treasurey raise whatever Carbon Taxes they neeed. The more the merrier as long as the most vulnerable in society are protected.

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