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Mar 29, 2023
Hunt Says UK Must Counter Risks Posed by Biden’s Green Subsidies
(Bloomberg) -- The UK government needs to protect domestic investment against the risks posed by US President Joe Biden’s massive package of green subsidies, and the government is working hard to devise appropriate measures, Chancellor of the Exchequer Jeremy Hunt said.
Hunt on Wednesday hailed the $369 billion US program, saying it’s a good thing the world’s largest economy is “taking climate change seriously.” He said that with the UK still spending a bigger proportion of economic output on the clean energy drive, the Americans are “playing catch-up,” but conceded their plan poses a danger to UK green investment.
“There are risks as a result of that and we need to mitigate against those risks,” Hunt told the House of Commons Treasury Committee on Wednesday. “That doesn’t necessarily mean matching subsidy for subsidy, but it means that making sure the overall package, which means people choose to invest in the UK, remains attractive.”
Hunt made his remarks the day before the UK government is set to unveil a slew of energy and climate change measures on what officials have billed “green day.” One possible new policy would be a tax on imports made using highly polluting processes to help shield British manufacturers from competitors facing less stringent environmental regulations. Prime Minister Rishi Sunak said on Tuesday that such a plan is in the works.
The Treasury is “making progress on a carbon border adjustment mechanism,” Sunak told Parliament’s Liaison Committee. “They are reasonable and sensible things to implement.”
Sunak said he’s open to cooperating with European counterparts on the plan, and has previously discussed it with German Chancellor Olaf Scholz when both were their countries’ finance ministers. Hunt himself has spent months looking at adding an emissions levy to protect the carbon-intensive steel industry.
The European Union reached a deal to set up its own mechanism late last year, with the aim of ensuring its pollution standards aren’t undermined by trading partners with weaker ones.
Energy Secretary Grant Shapps is expected to outline on Thursday how the UK will boost its energy security. Shapps will also respond to Biden’s Inflation Reduction Act, which enshrines the American green subsidy plan, in a bid to prevent net zero investors turning to the US. The Times on Wednesday reported that Shapps will start a long-awaited consultation on how to tackle the issue of “carbon leakage” — the carbon emissions produced in manufacturing imports.
Hunt said the UK hadn’t produced its response yet to the US act, because “I want the UK to remain competitive and I needed to see what the EU response was going to be.”
He countered the suggestion that Britain is losing potential investment in the form of recent decisions by chip-maker Arm Ltd. and building materials producer CRH Plc to list in the US by pointing to investments by BioNTech SE and Airbus SE. “We are the world’s sixth-largest economy, so there are going to be a multitude of decisions that go in either direction,” he said.
In a wide-ranging committee hearing, Hunt also said there is no certainty he won’t raise UK fuel duty in line with inflation next year, despite more than a decade of it being frozen. He noted that he wants to be a chancellor who simplifies UK taxes, and said that economic mistakes were made by Prime Minister Liz Truss, which showed “it’s clear you can’t fund tax cuts through borrowing.”
Asked about how much it is costing the government to settle a series of pay disputes with public sector workers including nurses, teachers and ambulance workers, Hunt said “we still don’t know” because not all the standoffs have been resolved. At the same time, he suggested there will be extra money for government departments from the Treasury to fund pay rises.
While departments would normally have to find the money for pay rises from within their agreed budgets, “this is a different situation because inflation was so much higher than expected and therefore the pay settlements have ended up being higher than expected,” Hunt said. “There is a discussion with departments as to how much help comes from the center, and we haven’t had that discussion yet.”
(Updates with Hunt, Sunak remarks starting in third paragraph.)
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