The Budget: George Osborne to put growth ahead of ‘green crap’

The Chancellor is expected to give in to business demands to reduce penalties for high use of fossil fuel, and that worries environmental campaigners

George Osborne will use his Budget this week to insist he is building a “resilient economy” as he prepares to sweep away more “green crap” – or environmental taxes – to help British industry to sustain the recovery.

The Chancellor, buoyed by news of a dramatic upturn in growth which he will say justifies his continuing commitment to austerity, is expected to ease carbon taxes for energy-intensive manufacturers. Amid renewed talk of Mr Osborne positioning for the Tory leadership, the Chancellor’s moves against green taxes – or “green crap”, as the Prime Minister was alleged to have described them, will be aimed at delighted Conservative MPs as much as British industry.

Mr Osborne is expected to act on business demands to freeze the carbon price floor, which imposes a tax on companies for high use of fossil fuels and came in last April. The CBI says it is restricting the ability of the manufacturing sector to contribute to the recovery. The Chancellor could freeze the tax for as much as four years, a move which will alarm environmentalists because it will lead to increased CO2 emissions.

It follows a scaling back of green levies in the Autumn Statement in December, when Mr Osborne pledged to cut £50 from household energy bills by reducing the energy company obligation.

Yet his Budget on Wednesday will come just 24 hours before Britain takes the lead in Europe to cut carbon emissions across the EU by 40 per cent by 2030. Ed Davey’s presence, as a Liberal Democrat Energy Secretary at the European Council in Brussels, will underscore his party’s insistence that close co-operation with the EU is essential for tackling climate change – two things that are under threat from right-wing Conservative MPs. The meeting comes ahead of a major report from the Intergovernmental Panel on Climate Change on the latest scientific evidence on the issue.

Mr Osborne will argue that, despite promising signs of growth, the UK economy needs to be more balanced towards manufacturing exports.

A Treasury source said yesterday: “The Government’s long-term economic plan is dealing with Britain’s debts, helping businesses create jobs and delivering increased security and peace of mind for hard-working people. But the job is not done. Britain is still borrowing too much. To earn our way in the world we have to invest more and export more. We need to back businesses right across the country and in all industries.

“So the Budget next week will continue to tackle the country’s problems head on and will set out what we need to do to build a resilient economy.”

According to a poll for The Independent on Sunday today, a third of people think they will end up paying more tax if Labour wins the election than if the Conservatives win. Nearly six out of 10 voters believe the Government is not cutting spending in a fair way and 63 per cent believe that rich people stand to benefit more than people on middle incomes. Mr Cameron and Mr Osborne are more trusted to make the right decisions about the economy than Ed Miliband and Ed Balls.

Meanwhile, a report from the Social Economy Alliance, to be published tomorrow, presents alarming findings that Britons have poor levels of economic literacy. A survey for the organisation found that only 48 per cent of adults say they understand how the economy works, with 56 per cent saying they understand how their spending decisions affect their local economy, and 38 per cent saying business and economic  news stories are not relevant to them. The report, From the Bottom Up, argues for more awareness of social enterprises, run by citizens and communities, that hand economic power to grassroots.

With more widespread knowledge and understanding of basic economics, the report says that people can take action and have more control over how things are run in their communities. It follows an international study in 2010 which found that economic literacy in Britain is behind many industrialised nations.

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