Burnham called for action on the first day

Andy Burnham will enter Downing Street next week with an overflowing in-tray, but business has told him where to start: energy bills that remain 45 percent above the G7 average and act, in the words of the CBI and Energy UK, as an “anchor” holding the economy.

Removing the green tax levy on business energy bills could cut costs by a fifth and boost the economy by £130 billion by 2050, according to a report from two lobby groups published on Tuesday, combined with analysis from Cornwall Insight and the National Institute of Economic and Social Research.

In small firms the stakes are high. Retailers, food and beverage manufacturers and tourist businesses, sectors that cannot consolidate or absorb energy costs, will benefit the most from the recommendations. That will resonate with eight out of ten SME owners who already fear what Premier Burnham will mean for their business.

The problem is not new, but it is getting worse. Britain’s electricity prices are putting firms at a disadvantage, hampering investment and contributing to the country’s sluggish productivity growth since the 2008 financial crisis, official price data shows. The war in the Middle East has added to the pain, as the UK’s reliance on imported natural gas has skyrocketed since Black Wednesday.

The main charge of this report is that successive Conservative and Labor governments have spent decades loading net-zero costs on electricity bills. Its remedies include scrapping the renewables obligation, a system introduced in 2002 requiring suppliers to supply a fixed amount of renewable energy, and scrapping a twelve-year tax on businesses using electricity generated outside the UK. The lost money, he says, should be returned through general taxation or public funds.

Dhara Vyas, chief executive of Energy UK, said: “Energy is a vital service that supports everyday life and economic growth.

Louise Hellem, the CBI’s chief economist, said: “With a new prime minister coming into office, it’s clear that reducing business energy costs must be an overnight priority.

Whether Burnham listens may depend on who takes him next door. Ed Miliband, who is seen as his likely choice to replace Rachel Reeves as chancellor, has pushed for the fastest possible de-fuelling strategy as energy secretary, drawing criticism from business groups who say the private sector is taking too much of a hit. Sowing rifts between Nos 10 and 11 is the last thing Burnham needs, when voters have abandoned Labor over Reeves’ £25 billion tax raid and the inefficient winter fuel U-turn.

Reeves is expected to make the announcement at a Mansion House dinner tonight, saying the government is “fixing the foundations, restoring economic stability, and proving our ability to deliver radical change”.

Burnham wants to revive the economy. The report’s conclusion is unwavering: that will not happen “against the high cost of electricity in developed countries”. With one in four manufacturers already exporting or scaling, SME owners will learn a lot from the new prime minister’s first appointment, and his first bill.