CBI: economy needs to be rebalanced to secure a ‘sustainable recovery’

The CBI’s budget submission calls for rebalancing the economy away from consumption to secure a sustainable recovery. However, the organisation’s proposals include freezing the Carbon Price Floor (CPF).

The UK’s leading business group expects robust growth this year and next but warned that to ensure the recovery takes root a rebalancing is needed. The chancellor will announce the Budget on March 19.

The organisation argues that a robust EU carbon price is needed to incentivise investment but the price level of the EU Emissions Trading Scheme is likely to be lower than the UK Carbon Price Floor for the foreseeable future. As a result, the CBI says this put British businesses, particularly those that are energy-intensive and operating internationally, as a disadvantage.

John Cridland, CBI director-general, said, “It’s vital that we have a robust carbon prices across Europe if we are to obtain the investment in energy infrastructure that the UK needs.

“At the same time, we need to recognise that British businesses, especially energy-intensive industries, are struggling with high energy costs so we want to freeze the Carbon Price Floor to help firms compete internationally, as well as ease pressure on household bills.”

The suggestion has been criticised by campaign group Friends of the Earth, which argues that UK businesses must play their part in creating a low-carbon and resource-efficient economy.

Friends of the Earth economics campaigner David Powell said, “The CBI has been a strong supporter of urgent action on climate change, so its appeal to the chancellor to freeze taxes on fossil fuel pollution is disappointing,

“The Carbon Price Floor isn’t perfect, but weakening it would send a very bad signal to invests. Instead of freezing the CPF, George Osborne should use the funds raised to insulate homes and help industry become more energy efficient.”

Other proposals put forward by the CBI include improving access to finance for small and medium-sized firms, by making the Seed Enterprise Investment Scheme permanent and offering incentives to investors, and creating a fiscally neutral budget.

Further reading:

Which? calls on chancellor to cut big six energy companies ‘down to size’

Autumn statement: Osborne delivers a win for social investment but omits environment

Shadow chancellor Ed Balls calls for a ‘green economic future’

Autumn statement: the reaction

George Osborne: UK should tackle climate change in ‘cheapest’ way possible