Ministers were “bounced” into retaining large subsidies for controversial on-shore wind farms by foreign-based energy companies who threatened to pull jobs and cash out of Britain.
Frantic-behind-the-scenes lobbying played a key role in last week’s surprise decision to stick to cuts in subsidies of just 10 per cent rather than the 25 per cent reductions demanded by more than 100 Conservative MPs.
The announcement by Ed Davey, the Liberal Democrat Energy Secretary, followed wrangling between his department and the Treasury and was presented as a big political “win” for his party – although he was forced to make other concessions on energy policy.
However a senior Whitehall source disclosed that the government was effectively railroaded into making its decision by foreign companies which make hundreds of millions of pounds a year in wind subsidies, which are added to household bills.
Company chiefs were alarmed by claims that the coalition dispute was set to drag on into the autumn, sparking uncertainty across the industry.
The source said: “Investors went absolutely mental. Very senior people in inward investors into Britain made it clear what this would mean for jobs and spending in this country.
“They were not sabre-rattling – they were serious. We realised we had to come to a decision.”
The source said David Cameron and George Osborne had been pushing for “something on onshore wind for their backbenchers” – confirming that the Prime Minister and Chancellor wanted the subsidy cuts of more than the originally planned 10 per cent.
However, it was denied that Mr Osborne had ever sought 25 per cent cuts – the figure demanded by Tory MPs.
“The Treasury crunched the DECC (Department for Energy and Climate Change) numbers about four or five times and the findings were always the same – 10 per cent was the right figure for on-shore wind,” the source said.
Among the foreign-based investors in on-shore wind in Britain are EDF, the French-based energy company, as well other firms and investment funds in Japan, the US, Norway, Sweden, France, Spain, the Netherlands and Germany.
Earlier this year The Sunday Telegraph revealed how the energy industry employed lobby firms to fight plans for larger cuts in subsidies and drafted in “eco-activists” to drum up support for new wind farms in the face of local opposition.
Tory MPs vowed to carry on the fight for larger cuts. Nick De Bois, the MP for Enfield North, said: “I do not believe the case for onshore wind has been made.
“It is for the Government to decide on policy and the detail of subsidies, not the energy companies. If this is the position of the industry, it is very disappointing.”
Backbenchers will step up their campaign for larger cuts in on-shore wind subsidies in the autumn. Mr Davey has signalled there may be another review of the programme – if new evidence shows that the cost of producing on-shore wind has fallen.
If there is a further review, it will begin in around a year’s time and any subsequent larger-scale cuts would only apply to wind farms built after the spring of 2014.
A source close to Mr Davey said the deal proved he was “not a walkover” and was able to fight just as hard as his Liberal Democrat predecessor as energy secretary, Chris Huhne.
“Chris did a lot of banging the table in Cabinet and poking people in public. Ed is different but he has shown he wants to play a key part in the greenest government ever and cannot be pushed around on a point of principle.”
Nobody from the Renewable Energy Association, the trade body for the renewables industry, was available for comment.
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