Rudd defiant over solar install levels as VAT row rumbles on

  • DECC.

    Rudd discussed the ongoing VAT row, but her comments will not have given

Energy secretary Amber Rudd has defended the impact subsidy cuts have had on solar deployment levels and clashed with opposition MPs over the ongoing VAT upheaval.

Rudd was grilled on the subjects during this morning’s oral and topical questions session in parliament, with members of the house seeking clarification on the government’s stance on VAT added to energy saving materials.

VAT was set to increase to 20% following a European Court of Justice decision last year and last month the government’s message was that the increase could not be averted.

But after HM Treasury’s consultation response was absent from Budget 2016 documents last week, rumours circulated that the government had backtracked amidst strong cross-party opposition to the move.

This was seemingly confirmed on Monday afternoon when financial secretary David Gauke said that the government had indeed decided not to proceed with the increase, and that the decision had been taken “some weeks ago”.

Despite Gauke’s comments however there remain inconsistencies with the government’s approach. Energy minister Andrea Leadsom intimated it could do nothing regarding the ECJ’s verdict in the same time frame Gauke said a decision had been taken to disregard it. In contrast to her department colleague, Rudd this morning claimed that prime minister David Cameron had “secured a great victory for VAT and for solar” when meeting the European Union ten days ago.

Labour MP and shadow DECC member Clive Lewis also referenced a written parliamentary answer provided by Gauke yesterday, which only went as far as stating that the current rates of VAT would remain “for the time being”. Lewis questioned the secretary of state over whether this had left room for a “u-turn on a u-turn”.

While it would be difficult for the financial secretary and HMT to backtrack once again, without a commitment not to increase VAT enshrined in legislation there remains a slight possibility that the government could still increase the rates.

There was no mention of energy saving materials VAT in the Finance Bill which was published this morning – something noted by Rudd – and the Solar Trade Association has reiterated its stance that the government’s commitments need to be legislated.

“The secretary of state has declared retaining low solar VAT rates a 'victory' in Europe for the prime minister. Conservative MPs have tweeted their support for the apparent decision. However, unfortunately Treasury is stopping the celebratory fizz corks flying by refusing to clearly confirm that solar will continue to benefit from reduced VAT.

“The industry has had more than enough uncertainty and this shadow of doubt needs to be removed by enshrining the lower VAT levels in the Finance Bill. We still need to see this commitment to common sense in black and white,” Leonie Green, head of external affairs at the STA, said.

Meanwhile the industry has continued to scrutinise other claims made by Rudd this morning, particularly that solar has continued to see “high levels” of installations under the new FiT regime and that the technology does not now need subsidy.

Since the former feed-in tariff regime closed on 15 January, just under 15MW of residential (>10kW) solar and a further 13.9MW of commercial and industrial (10kW+) solar has been installed, far below what DECC expected and set out in the cap limits.

Lightsource chief executive Nick Boyle has also hit back at the government’s use of comments made by him regarding the deployment of subsidy-free solar, which he said had been taken out of context.

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