Budget 2014: Help for firms hit by high energy bills

Welsh Secretary David Jones says the compensation would be a 'significant' help for businesses with high energy costs

Welsh businesses with very high energy bills are in line for compensation under a key announcement in the Budget.

It is understood 16 firms including Tata Steel in Port Talbot qualify in Wales, sharing some £240m compensation.

There were fears high energy bills could force industries to relocate.

In other Budget announcements, the Welsh government will receive an extra £36m to spend over the next two years, a little over 0.1% of its £15bn annual budget.

The increase comes as a result of extra spending in England.

But the Budget was dismissed by Welsh ministers as being "full of missed opportunities" to boost economic growth.

UK ministers also said raising the personal income tax allowance to £10,500 in 2015 meant another 14,000 people in Wales would no longer pay income tax.

Analysis

With unemployment falling - and falling fast in Wales - Chancellor George Osborne could be forgiven for thinking that everything looks rosy.

But the coalition government's defining purpose is to bring down the annual deficit - the gap between what the government raises and what it spends - and that job is not yet done.

The chancellor was keen to remind MPs of that fact, and there is a clear political message too - now (or rather next year) is not the time to change the party in charge with work still to do.

Ministers in Cardiff Bay hoping for some sort of windfall will be disappointed. An extra £36m for the Welsh government to spend over the next two years represents a tiny proportion of the £15bn annual budget.

More significant will be the help for the so-called energy intensive industries - that is firms with a huge electricity bill.

The Wales Office and the Welsh government had raised concerns that big employers such as Tata Steel would eventually have to relocate if bills kept going up.

As a result of the income tax changes, some 1.16m taxpayers in Wales will be on average £61 a year better off.

Many of those no longer paying income tax will, however, continue to pay National Insurance after April 2015.

Beer duty is also being cut by 1p.

The help for industries using huge amounts of energy is also expected to benefit the UPM Shotton paper mill in Flintshire, the Spanish steel maker Celsa's plant in Cardiff and the Dow Corning chemical works in Barry.

It follows a call for action in January by the boss of Tata Steel's operations in Europe.

Karl Koehler argued that heavy industries in the UK were burdened with environmental obligations that pushed up their energy bills, sometimes to levels 50% higher than their European competitors.

Speaking at a conference in London, he had urged ministers to back businesses that were part of "foundation industries" - including chemicals and metal-based manufacturers.

Mr Koehler quoted a report by consultants that said these companies employed nearly half a million people in the UK and accounted for 30% of total exports and imports.

He said they formed a key part of any economic rebalancing strategy for the UK, which would encourage growth outside the south east of England.

Welsh Secretary David Jones said the announcement would come as a "welcome boost to the energy intensive industries that employ thousands of people across Wales".

"Today's Budget makes clear that the government's commitment to strong, sustainable and balanced growth is working and that businesses and families across Wales will continue to benefit from the economic recovery.

"Tomorrow I will introduce the Wales Bill which will give new tax and spending powers to Wales.

"However, it will be up the Welsh government to seize the opportunity and drive forward Wales's economic growth with the new powers that are being offered," he added.

'Investment boost'

Welsh Finance Minister Jane Hutt said publication of the Wales Bill would be "an important step forward" that would "take us closer to gaining the vital borrowing powers we need to invest in Wales's infrastructure".

Start Quote

We needed this budget to deliver a significant capital investment boost. This has not happened”

End Quote Jane Hutt Welsh Finance Minister

But she added that the Labour administration in Cardiff Bay wanted to see more measures in the budget to boost capital investment.

She said: "The chancellor has given Wales an additional £36m over the next two years. But, at the same time, we are being forced to find at least £70m from our budget over the same period to cover public sector pension costs."

"The employment statistics published earlier today show that unemployment in Wales is now lower than in England, Scotland and Northern Ireland, a clear example that the Welsh government's policies are working.

"For us to build on this further we needed this budget to deliver a significant capital investment boost. This has not happened.

"However we will continue to use the resources we have available to us to invest in our Wales Infrastructure Investment Plan priorities."

Plaid Cymru said it was disappointed there were no plans for an investment bank for Wales.

The party's Westminster leader Elfyn Llwyd said: "We have argued long and hard about a Welsh investment bank, in other words a bank which would be publicly backed up in order to provide money for small and medium sized businesses.

Residents of Llangennech in Carmarthenshire had mixed views on the Budget

"At the end of the day, it's important everywhere, but it's crucial for Wales when you consider that in the urban setting, or a rural setting, 90% roughly of the employment in the whole of Wales comes from that sector, and we know that that sector is least able to draw down money from the banks currently.

"I am disappointed about that, because I think it would have been a great boost to the economy of Wales."

The Liberal Democrats said their policies were "at the heart of the long term economic plan that is delivering jobs and growth in Wales".

The party's Welsh Kirsty Williams said: "Today the Liberal Democrats have managed to raise the tax-threshold to £10,500.

"This means 1,160,000 people in Wales will have had their tax cut by £800 since the Liberal Democrats came into government.

"Before the election, David Cameron said the Liberal Democrat pledge to raise the tax threshold was unaffordable. I am pleased that we have proven him wrong."

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