Why is the government limiting spending on the FITs – it’s not their money?
True – the FITs are paid for by electricity users.
However it has been decreed that any spending caused by government legislation may be treated as public expenditure.
The official government explanation was:
The Office of National Statistics (ONS) is the ultimate arbiter of whether a UK Government policy should be classified as tax and spend in the National Accounts. Such judgments are made independently of Government. ONS are guided internationally in their decisions, but in broad terms define mechanisms as taxes where they result in compulsory payments by an individual or organisation who does not receive a direct benefit in return. This is referred to as a “compulsory unrequited payment”. This may result in a policy being classified as a tax even where money does not flow through a Government account (because the outcome is similar to Government taking in then redistributing the money).
A well-established example is the Renewables Obligation, which requires energy suppliers to purchase Renewables Obligation Certificates (ROCs) from renewables generators, or to make payments to the buy-out fund. Because energy suppliers do not receive a benefit in return, the payment they make is defined as a tax. The redistribution of these revenues (ie the revenue received by renewables generators for their ROCs) is defined as public expenditure.
The ONS decision to treat the Renewables Obligation as a tax is published at http://www.statistics.gov.uk/articles/economic_trends/ET635Gazely.pdf
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