Who pays when Britain's green levies leave the industrial bill

John Healey, Britain's new chancellor, has inherited a bill he did not write. In July the CBI and Energy UK, the lobby groups for big business and the power industry, handed his incoming government a blueprint demanding that billions of pounds of green charges be lifted off companies' electricity bills and moved onto general taxation. Their core complaint is hard to dispute: British manufacturers pay around 45% more for electricity than the median across the G7.

The dispute is not really about the number. Every interested party accepts the premium. What they disagree about is its cause, and who should pay to remove it.

Start with the cause, because it is the most revealing part. Prices for industrial gas in Britain sit close to the G7 median; only electricity deviates. That gap is a signature of the country's own policy architecture, not of world fuel markets. Since the 2000s Britain has chosen to pay for decarbonisation by loading its cost onto every unit of electricity consumed, through a stack of charges: the Renewables Obligation, which still funds generation built years ago; feed-in tariffs; the capacity market; and the climate change levy. The result is a quiet subsidy arrangement in which legacy wind and solar projects, and the national grid's reinforcements, are financed directly by the users of power.

The perversity, as even the Treasury has conceded, is that this prices the very thing the policy wants more of. A transition away from fossil fuels depends on electrifying heat, transport and industry — heat pumps, electric lorries, smelting with clean power. Load a levy on to the unit, and you make clean electricity dearer than the dirty gas it is meant to displace, taxing the switch that net zero requires while shielding its rival. Business groups call the arrangement a choice between competing at the margin and building the industries of the decades ahead. For the investment capital sitting on the sidelines, expensive power is a tax on every future factory that would choose Britain.

That logic is no longer new in Whitehall. In the autumn budget of 2025 the then chancellor, Rachel Reeves, applied it to households, shifting roughly £2.3bn of green costs off domestic bills and onto general taxation and cutting the average bill by about £150 a year. She explicitly spared industry. The CBI and Energy UK now want the same medicine for the manufacturing economy: strip the Renewables Obligation, feed-in tariffs and the climate-change-levy element from business electricity bills and pay for them from general taxation instead.

The strongest version of their argument is that the current patchwork is already an admission of the flaw. Today relief is rationed through the British Industrial Competitiveness Scheme, which exempts the most energy-intensive firms from the levies and was expanded in April from 7,000 to 10,000 companies, at a Treasury cost rising to about £600m a year. The scheme cuts eligible firms' bills by up to a quarter — but it does not start until 2027, and it leaves the vast majority of the country's businesses, some 2.7m of them, paying the full stack. Industry's plea is that the rationing is backwards: it gives the cheapest power to those that already built in Britain and denies it to everyone else who might.

Yet the request conceals an arithmetic that the lobbyists' report glides over. Moving these charges off bills does not abolish the payments into the renewable fleet; it relocates them to the taxpayer. Every pound lifted from an industrial bill is a pound the Exchequer must find in income tax, national insurance or borrowing, at precisely the moment the new government is guarding a thin set of fiscal headroom against a full budget due in October. The report's promised prize — more than £130bn of additional economic output between 2027 and 2050 — is generated on the explicit assumption that general taxation will cover the costs. That assumption is the entire controversy dressed up as a discount.

The instinct to ask who gains and who is constrained is the right one here. The winners of the proposed switch are clear: energy-intensive manufacturers, and the economy's competitiveness if the model is right. The losers are just as identifiable. Households would shoulder, through their taxes, a cost currently borne by the firms that consume the power they help create. And the deal depends on a government that has repeatedly promised not to borrow for day-to-day spending choosing to take billions onto its books for the sake of lower factory bills. The safest reading of the autumn budget is a partial move: more businesses brought under the exemption, the levies trimmed but not abolished, the Treasury absorbing as much as its arithmetic allows and no more.

For investors with exposure to British industry, the lesson is structural rather than a number to trade. Energy is not, in Britain, a cyclical input that will revert with world prices; it is a competitiveness tax that the country wrote into its own regulation, and which the elected government is deciding how to redistribute. The real question is not whether the chancellor cuts the levies but who pays for the cut — the factory owners reading the headline, or the taxpayers reading their pay slips. That answer will be set in October, in the small print of the budget. It is worth more attention than the lobbying that precedes it.