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Solar cuts will cost Treasury millions and destroy up to 29,000 jobs
23 November 2011
New analysis by strategic energy consultants Element Energy, commissioned by Friends of the Earth and the Cut Don't Kill campaign has revealed that the Government's planned cut to the Solar PV Feed-in Tariff will destroy up to 29,000 jobs and cause the Treasury to lose up to £230 million a year in tax income.
The research highlights the remarkable fact that this cut will cause the Government to lose sizeable amounts of money through reduced income taxes and National Insurance. Campaigners have described the cut as "utterly counterproductive".
The estimated current income for the Treasury from employment taxes and VAT alone from the Solar PV sector is £275m - a figure which is even higher once corporation tax and indirect spending are taken into account. The proposal to cut the Feed-in Tariff from 43.3p per kiloWatt hour to 21p per kWh has been billed by Climate Change Minister Greg Barker as a money-saving measure, but Element's new analysis demonstrates that in fact it would be a costly loss to the Government through reduced tax revenues.
Friends of the Earth and Cut Don't Kill - a coalition of NGOs, solar power companies, consumers and environmental campaigners - are calling for the Government to reconsider and drastically reduce the planned Feed-in Tariff cut. The cut is currently intended to take place on December 12 - before the Government's consultation on it has even come to an end.
The key findings of the analysis are that:
· "DECC's uptake assumptions imply a loss of between 18,000 and 29,000 jobs in the industry, depending on whether the Energy Performance Certificate 'C' rating requirement is introduced [as a requirement for home installations to receive the tariff]."
· "This would result in a loss to the Treasury from income taxes / NI of between £150m and £230 per year."
· "The future PV deployment rate used in DECC's Impact Assessment represents a fall of 50-95% relative to installations in 2011."
· Our analysis suggests that Treasury inflows from the PV sector are currently £275m per year from employment taxes and VAT on domestic installations, not accounting for corporation taxes, indirect spending in other sectors etc."
Friends of the Earth's Executive Director Andy Atkins said:
"Government plans to slash solar incentives will devastate a thriving industry and pull the plug on thousands of jobs. In a time of economic gloom, the solar industry has been one of the UK's brightest success stories, enabling homes and communities across the country to free themselves from expensive fossil fuels. We believe the Government's proposals are not only wrong, they're also illegal - which is why we are taking Ministers to court."
Howard Johns, of the Cut Don't Kill campaign, said:
"The Government are forging ahead with a cut which is going to cost the Treasury a fortune, as well as devastate a thriving industry. It is madness at a time when David Cameron's priorities are deficit reduction and delivering growth to enact a proposal which will make the deficit and the economic situation worse. This study shows that the tariff cut is utterly counterproductive for the Government - added to which tens of thousands of workers are facing redundancy before Christmas. This was meant to be the greenest Government ever, but if they push ahead with their plans they will become famous only for shooting themselves in the foot."
Notes to Editors
1.Cut Don't Kill is a coalition of solar power companies, NGOs, consumers and environmental campaigners who have united to oppose the Government's proposed cut in the Solar PhotoVoltaic Feed-in Tariff.
2. Friends of the Earth's legal challenge to cuts in solar incentives is part of its Final Demand campaign which calls for energy we can all afford and a public inquiry into the power and influence of the Big Six energy companies. Find out more at www.foe.co.uk/finaldemand.
3. The new analysis cited in this press release was commissioned jointly by Cut Don't Kill and Friends of the Earth, and has been carried out by Element Energy. It focuses on the economic and tax revenue impact of the proposed cuts to the Feed-in Tariff, and will be published in full in the coming week.
4. The Solar PV Feed-in Tariff was established in 2010 as a means of encouraging consumers, landlords and community projects to install solar power systems. It pays 43.3p per kWh for energy generated through Solar PV, acting as an incentive and a means to compensate for the cost of installation. It was intended to taper away over a few years in line with the falling cost of solar technology, leaving the solar sector able to stand subsidy-free - but is now scheduled for a cut of over 50% on 12th December 2011.
5. Element Energy is a strategic energy consultancy specialising in the analysis of low-carbon energy in the power, buildings and transport sectors.
If you're a journalist looking for press information please contact the Friends of the Earth media team on 020 7566 1649.
Published by Friends of the Earth Trust
Last modified: Nov 2011