Data centres’ contribution to our economy will be enormous, and they richly deserve a tax break in the form of a climate change agreement, says Peter Judge
If you were short of money would you quit your job in order to save the bus fare? I don’t think so. Unless you have a very low wage or a huge commute, your transport costs are a price worth paying to get your salary.
The government is being asked to make a similar calculation with data centres. They can provide a huge input – hundreds of millions of pounds – to the economy. And to ensure that income, the government is being asked to forfeit a much smaller amount
The sums are fairly obvious, and we can hope that the Government will see sense. But given its addiction to austerity there may be a danger that the data centre industry could be crippled by a really dim decision.
Data centres deserve a CCA
Let’s explain this from scratch. The data centre industry has been worried for some time that the imposition of the CRC tax (it originally stood for carbon reduction commitment) will put up energy costs and make British data centres uncompetitive.
To some extent, the fears are exaggerated. In its first years, the tax will be applied according to energy use figures from 2008, which is so long ago in data centre years that many of the larger players, like Rackspace, were simply not on the UK map then.
But the effect of CRC has been real, in casting a blight on older players, and the industry as a whole. Putting up energy costs is a good way to nudge people to reduce energy use, but it might well not work for businesses that can go abroad – and data centres are very much in that category.
So, the data centre industry is asking for a climate change agreement (CCA), which would exempt it from the CRC and from 90 percent of the climate change levy, a previously existing tax on large operators. The Department of Energy and Climate Change (DECC) issues CCAs but only if it can convince the Treasury they are worthwhile.
In this case, the sums really are easy. Data centres are energy intensive, and in many cases the electricity they consume is their largest single cost. However, the small increment of tax imposed by the levy and the CRC would only bring in about £5 million to £10 million to the government.
In exchange, data centres themselves generate hundreds of millions. The UK has an enviable position with around five percent of the global market, thanks in part to the climate here which will allow more efficient, greener data centres.
But that’s only part of it. Data centres can be located anywhere, but you can bet that Facebook, Google et al will be more likely to keep behind the Government’s vision of a new digital economy if they have their data centres here.
Industry body Intellect is leading the charge here, making a reasoned case with DECC that can be passed on to the Treasury.
If the data goes elsewhere, the digital economy will also move away. A tax break for data centres is a small price to pay for a digital future. If you agree, tell Intellect!
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