Retailers are "surprised and dismayed" after a £1bn environmental stealth tax was revealed in the Comprehensive Spending Review yesterday.
It has emerged that money put into the Carbon Reduction Commitment (CRC) scheme by participating business will not now be recycled back to those companies with good environmental performances, but will instead be returned to the Government.

BRC director general Stephen Robertson said the announcement called the Government's green credentials "into serious question", and also criticised the move to pare back the Warm Front scheme, funded by the Government to provide insulation and heating improvements.

In a statement released yesterday, Mr Robertson said: "This is a stealth tax on business which not only goes back on the commitments given in developing the scheme but removes a major source of incentives to reduce carbon emissions."

He added: "It is appalling that the Government is sneaking this in, introducing a new burden on businesses that are trying to create new jobs to offset the public sector cutbacks and growing the economy to generate the tax base to pay down the debt. Because they use a lot of property, retailers will be particularly hard hit, despite having led the way in tackling climate change."

The CRC scheme will put a price on carbon emissions from energy use, forcing organisations to buy allowances equal to their annual emissions. It was set up as a revenue-neutral scheme, intended to create incentives for businesses to improve their environmental performance. It is currently operating as a date-gathering only exercise, but companies are due to put real money into the scheme from April 2011, and were expecting to get money back from October 2011.

Those likely to be affected by the 'green tax' are big high street chains such as Marks & Spencer, Tesco and Argos, who are already preparing to take a hit when VAT is hiked up to 20% in January.