Boris Johnson wades into community energy tax relief row

Mayor of London and Conservative MP Boris Johnson has criticised his own party and accused the Treasury of endangering community renewables projects by cutting tax relief measures.

In a letter republished by the Guardian, Johnson’s deputy mayor for the environment Matthew Pencharz addressed financial secretary to the Treasury David Gauke in the wake of last month’s announcement that the Treasury was to exclude investors in community energy projects from receiving tax relief under the EIS, SEIS and SITR schemes.

The letter states Johnson’s concern that “the proposals may endanger the expansion of the [community energy] sector” and argues that the short notice given by the Treasury could bring a premature end to projects already in the development and fundraising phase.

Johnson said that he shared the Treasury’s view that any abuse of the scheme – touted by HMT as the reasoning behind the decision – must be ended. “However, there is a danger of unintended consequences in ending it altogether, and perhaps a light-touch approach could be taken where local authorities, which are generally involved in community energy schemes, could be used to certify that schemes are legitimate and operate as claimed,” the mayor added.

The letter notes London’s target of deriving 25% of its energy from decentralised sources by 2025 in order to take pressure off upstream generators, and Johnson said that community renewables are an “important element” of that aim.

“Whilst they remain relatively high-risk investment, the mayor believes tax relief for investment in community renewable generation should be maintained while minimising the risk of misuse, and then as they become more widespread and risk reduces, consideration could be given to scaling down tax relief accordingly,” Johnson concluded.

The measures, snuck into the 2016 finance bill between its second and third readings, have been strongly criticised since their revelation and the issue has proven to be highly contentious.

Last week Labour and Co-operative MPs Gavin Shuker and Steve Reed fuelled the row both by requesting answers from the Treasury and calling for a parliamentary debate on the decision, however there has yet to be a public answer to either request.  

Earlier this week almost 20 community solar projects announced that they were rushing to raise funds ahead of the 30 November deadline, however a substantial amount of community renewables projects are now at risk of being shelved. Balcombe’s 5MW solar farm is perhaps the most high-profile casualty of the decision to date, however community renewables specialist Mongoose Energy have estimated that as much as half of its own pipeline could now fail.