Intelligence Briefing - 1 July 2011

Climate Change minister pressed on regulatory burdens

EEF this week met with Lord Henley, Parliamentary Under Secretary of State for Environment, Food and Rural Affairs, to discuss the Defra consultation on mandatory Greenhouse Gas (GHG) reporting. We argued that GHG reporting, whilst a useful tool in raising awareness of carbon emissions for a company, should remain voluntary. Instead we pointed out that Defra has not gone far enough to promote the current voluntary GHG reporting guidance. We also argued that if the government does go down this legislative route, it must hold true to its commitment on ‘one in, one out’ policy making and remove an equivalent legislative burden in this area.

We will be submitting a formal response to Defra on Tuesday 5th July.

For more information, contact Helen Drury, Senior Climate and Environment Policy Advisor

EEF urges minister to deliver electricity market reforms that benefit consumers as well as investors

We met with Energy Minister Charles Hendry and his senior civil servants as part of the Business Energy Forum. This key stakeholder group brings together energy suppliers, industry and the government to discuss key policy issues. The agenda focused on the government’s ambitious programme of electricity market reform designed to increase investment in low-carbon energy. EEF stressed the importance of adopting a balanced approach that maximises benefits to all sides of the market. In particular, support for low-carbon energy must be as cost-effective as possible and provide certainty over returns for low-carbon generators.

For further information contact Roger Salomone, Energy Adviser

Talking finance issues at European-level

The European Forum for Manufacturing (EFM) and the Association for Financial Markets in Europe (AFME) held a Roundtable Discussion between banks, companies, and MEPs at the European Parliament in Brussels this week. Topics under discussion included: project finance in a post-crisis world; SME finance issues; derivatives legislation; and markets and financial instruments.

EEF member Craig Naylor, MD of NTR Ltd an SME specialising in tooling repair based Yorkshire, attended the event and gave a formal intervention in the roundtable to the MEPs on SME finance issues. Craig pressed the MEPs to consider ways of boosting competition in the UK banking sector and encouraging sources of finance outside of banks to develop in the wake of the financial crisis. He also urged the banks to consider investing in improving their understanding of, and service to, the manufacturing sector to improve the flow of finance to SMEs that have sound proposals for growth.

For further information contact Andrew Johnson, Senior Economist

Mixed reception to CRC changes

On Thursday DECC announced the simplification of the CRC Energy Efficiency Scheme. Although we welcome any attempts to try and simplify what is an extremely complex scheme, we are disappointed that the government didn’t go further, by for example scrapping the League Table. Nonetheless key aspects of the simplification include a CCA exemption blanket, fixed prices for allowances, and a review of the threshold for participation in the scheme. DECC will be consulting in 2012 but welcome comments and views until September.

For more information contact Helen Drury, Senior Climate and Environment Policy Advisor

Manufacturers meet ministers in the House of Commons

At a lunch organised by Jake Berry MP this week EEF joined manufacturers raising their concerns and priorities with ministers including Chris Grayling, David Gauke and Vince Cable. A number of issues were raised, including how the tax system treats new capital investment, raw materials shortages and continuing challenges raising external finance. EEF highlighted the need for the government to back its commitment to apprentices with a focus on equipping people in compulsory education with the skills needed to enter the programme.

For more information please contact Lee Hopley, Chief Economist

Latest on State Pension Reform

In October 2012 the government will introduce a series of pension reforms, which will have significant implications for employees.

In our response to the current Green Paper ‘A State Pension for the 21st Century’, we urged the government to take the bold step of introducing a single tier state pension.

We have long-argued that the forthcoming workplace pensions reforms - auto enrolment, which comes into force for the largest companies in October 2012 – will be ineffective in raising private pension savings unless it is clearer to workers that it pays to save.

For the government the challenge is to get the balance right between reducing pensioner poverty, controlling the cost of state pension provision and maintaining an incentive to save. To square the circle, the government proposed two options. The first would accelerate changes already planned to make the earnings-related additional state pension (known as State Second Pension) flat-rated by 2020. The second, more radical option, involves merging the basic pension and State Second Pension into one, payable at about £140 per week in today's prices.

Under the latter option, reliance on means-tested state support would reduce more quickly, increasing the incentive to save. But it would also involve abolishing contracting out for salary-related pension schemes. Employers and employees would lose the current national insurance contribution (NIC) rebate. To absorb the extra costs employers are very likely to either increase member contributions, downgrade accrual rates or close their final salary schemes.

To reduce these risks, we made a number of recommendations to make it easier for employers to keep salary-related schemes open. These include using the receipts from the extra NIC to phase in the changes and making it easier to make consequential changes to schemes.

The next step will be a White Paper in which the government will refine its proposals. We have urged the government to make early announcements on how it plans to support employers who still have active final salary schemes.

For further information contact Judith Hogarth, Legal Adviser

As outlined above EEF responded to the government’s consultation on the single state pension, where we urged radical steps but also measures to protect any possible threat to private schemes. Remarks were covered in the FT (subscription required) and Daily Telegraph. We also commented in the Financial Times on the issue of competitiveness as far as energy and climate change policy is concerned as well as support for innovative fast growing companies.

Thu 7th: Index of Production; MPC rate decision
Fri 8th: Producer Price Index

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