Unaffordable and unsustainable, Rupert Darwall explains why Labour’s worst stealth tax must be abolished
The bubble has burst; there are no proceeds of growth to share and Britain’s budget deficit is, in the words of one central banker, truly frightening. Can Mr Cameron give voters a break, one which will leave them tangibly better off and is unambiguously good for the economy? Yes he can.
The Renewables Obligation can claim to be Labour’s worst stealth tax. Unlike VAT, it is bundled into people’s electricity and gas bills without them knowing how much it costs. The money it raises is then spent with minimal accountability or regard for value for money. Since its introduction in 2002, the Renewables Obligation has cost consumers and businesses £4.4 billion. By 2027, when it is was originally planned to end, it will cost all of us a further £28 billion. It is now intended to run until 2037, so this figure, already breathtaking, will grow enormously — no one knows by how much.
What are consumers getting in return for being forced to pay an extra 14 per cent for electricity and around 3 per cent for gas in environmental levies? Answer — lots of wind farms producing some of the world’s most expensive electricity. According to the Department of Energy and Climate Change, in 2008 the UK’s onshore wind farms had a load factor — the proportion of time wind farms generate electricity at their theoretical output — of less than 30 per cent (the five offshore farms were slightly better at 35 per cent). Consumers don’t just pay for the wind farms. They also pay for the back-up capacity when there is too little wind, and will fund special grid services to cope when there is too much.
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