Rt Hon Philip Hammond MP
Chancellor of the Exchequer

Treasury
1 Horse Guards Road 
London
SW1A 2HQ

18th October 2016

ML.PH.N0015.CV.18.10.2016                                                                                                      

Dear Philip,

Re: Changes to Business Rates affecting Solar Power Generation from Rooftop Panels

It has come to my attention that the current review by the Valuation Office Agency of Business Rates in the UK may have serious financial implications for businesses, community groups and others who have installed solar photovoltaic (PV) panels on their rooftops.

I have been in touch with Baroness Neville-Rolfe on this issue in the Department for Business, Energy and Industrial Strategy – but given that the Valuation Office Agency, which is ultimately responsible for this change, is an executive agency of HMRC and therefore reports to Parliament via the Treasury, I am writing to urge you to act on this issue too.

The changes to Business Rates that will come into effect on the 1st April 2017 may lead to a six to eightfold increase in the Rateable Value on solar photovoltaics (PV) installed for self-generation. According to the Solar Trade Association, this may make installing and running solar PV economically unfeasible for thousands of businesses and organisations across the UK – in fact, it is possible that businesses with panels already installed may be forced to remove them. These changes have been widely reported in the media.

Given the urgent need to decarbonise our economy and the important role that solar must play in that, this would be a worrying and deeply regressive development. This policy change would further undermine the confidence of the business and investor community – indeed, I have heard from businesses in my own constituency who have had projects put on hold because of the proposed increases. At a time when the government is considering its new Emissions Reduction Plan and a new industrial strategy, this move would send all the wrong signals.

As well as affecting businesses, the tax increase will also affect schools and community groups. It seems particularly unfair that the increase will affect state schools who have installed solar panels but not private schools, who are exempt due to their charitable status. This may well come as a surprise to teachers, parents and school-children whose time and energy has been spent supporting the transition we need to make to a zero-carbon economy.

This indiscriminate and disproportionate tax increase comes at a time when solar continues to outperform all expectations. This year, the UK saw an estimated 6,964 gigawatt hours (GWh) generated by solar over the summer period: 5.4% of the UK’s electricity demand. Indeed, solar power generated more electricity than coal in the six months running up to the end of September". On top of this success, a new report recently published from Aurora Energy Research found that the cost of integrating solar – set to be the cheapest form of electricity generation by the mid-2020s– into the national grid is “negligible”.

I am writing to ask you to urgently clarify the government’s position on this issue, and, in the short-term, to urge you to immediately announce an extension of the exemption on small-scale (less than 50KW) solar installations.

Finally, you may be interested to know that I have worked with a number of MPs on an Early Day Motion on this issue.

I look forward to hearing from you.

Yours sincerely,