Unless there is a solution to the row, which is bringing two Cabinet ministers - John Gummer, the Secretary of State for the Environment, and Michael Heseltine, President of the Board of Trade - into conflict, Britain will breach a treaty commitment to control emissions of climate changing pollutants.
Mr Gummer wants the new Energy Saving Trust to curb emissions of carbon dioxide, the most important 'greenhouse gas', using household electricity and gas saving programmes aimed at low income homes hardest hit by VAT rises.
By the late 1990s these programmes, some of which are already being piloted, should have cost up to pounds 400m a year, with nearly all of the money raised through levies on household gas and electricity bills. These would have had to rise by about 2 per cent initially, but should then have dropped as the energy savings came into effect.
But the director-generals of Ofgas and Offer, the regulators of the gas and electricity industries, are refusing to allow these charges. Professor Stephen Littlechild, head of Offer, is unwilling to contemplate anything more than pounds 25m a year being raised from electricity customers. Claire Spottiswoode, the new head of Ofgas, said she doubted whether the levy was legal.
Today Lord Moore, the former Tory Cabinet minister who chairs the trust, will meet Mr Gummer to urge him to find a solution. The trust answers to the Department of the Environment, while the regulators answer to the Department of Trade and Industry. The trust had been hoping to spend pounds 15m this year, which is now in doubt.
It was to have been a cornerstone in the strategy for returning Britain's rising annual emissions of carbon dioxide to their 1992 level by 2000 - a promise made at the Earth Summit in Rio de Janeiro.
Talks have begun in an attempt to break the impasse. One solution is for the Government to bypass the regulators and put a further small tax on gas and electricity. But that seems unlikely given that the VAT increase is proving so unpopular.Reuse content