Energy crisis requires government action to speed the business transition to a low carbon economy

The Institute of Directors is calling on the UK Government urgently to adjust its tax policies to take account of the extraordinary energy cost pressures businesses currently face. This should include using tax incentives to support the business transition to a low carbon economy, with less dependency on expensive fossil fuels.

Specifically, the IoD is calling on the Government to:

• Relieve the burden of increased costs by reversing this year’s rise in employers’ national insurance contributions.
• Develop clear commercial incentives for business to invest in energy efficiency, through a differential corporation tax for companies who have achieved net zero. Further detail is laid out in the IoD’s policy paper, ‘The Green Incentive’.
• Offer smaller businesses ‘Help to Green’ vouchers, as initially proposed by the Federation of Small Businesses, and other financial incentives to help cover the cost of investment in energy efficiency and microgeneration.
• Counter weak business confidence by making the capital investment super-deduction permanent and providing greater tax incentives for training in skills shortages areas. Further detail is laid out in the IoD’s policy paper, ‘How To Increase Business Investment’.

Dr. Roger Barker, Director of Policy at the Institute of Directors, said:

“The rise in the market price of energy has had a negative impact on many businesses. For many, fuel and energy are significant cost components.

“The best way to reduce the UK’s vulnerability to adverse developments in global energy markets is to develop domestic energy sources and reduce dependency on expensive fossil fuels. Therefore, we urge the Government to facilitate this process by speeding the transition to a low carbon economy and by taking immediate measures to improve energy efficiency.

“To date, government policy has failed to address the contribution that SMEs can make to improving energy efficiency. We believe that the best way to spur change would be a clear, commercial incentive for business to invest in energy efficiency measures through a differential corporation tax for companies who have achieved net zero. This is something that an emergency budget could consider in the context of re-evaluating next year’s hike in corporation tax.

“In the short-term, it is incumbent on government to ensure that its own policy decisions do not make things worse for business. So, we are also calling on government to reverse this year’s damaging rise in employers’ national insurance contributions that consciously and deliberately raised business costs even further.

“And at a time when business confidence is extremely shaky, government policy needs to work harder to encourage businesses to commit to the investment that will kindle a recovery. For this reason, we want to see the temporary capital super-deduction made permanent and greater tax incentives to invest in the future skills that our country needs.

“For smaller firms, additional direct help is needed to facilitate energy efficiency, which is why we support the proposal by the Federation of Small Businesses to provide ‘Help to Green’ vouchers to help cover the cost of investment in microgeneration and other energy efficiency measures.

“We are also supportive of government action to help households manage their high energy bills. What is good for consumers is good for business, too.”