Retailers have hit out at the government’s £1bn “business stealth tax” that emerged from yesterday’s spending review.

The British Retail Consortium (BRC) said that businesses were “surprised and dismayed” at changes to plans for incentives for businesses to become more environmentally friendly.

The BRC said that the plans to use cash from businesses signing up to the Carbon Reduction Commitment to reward the greenest businesses have been scrapped and the money will go to the government.

The Carbon Reduction Commitment was set up to give companies incentives to improve their environmental performance with companies due to start putting money into the scheme next April. It was then due to be redistributed to the greenest companies as a reward.

However in yesterday’s spending review it emerged that this money will be kept by the government.

The BRC said that because they use a lot of property, retailers will be particularly badly hit along with hospitals, universities and local authorities.

BRC director general Stephen Robertson said: “We are surprised and dismayed that the £1bn per year participating businesses will put in to the Carbon Reduction Commitment scheme is no longer to be recycled to participants but is instead to be pocketed by the Exchequer.”

“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.

“A tax of this size surely merits a mention in the Chancellor’s speech.  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 Carbon Reduction Commitment works by charging retailers for a permit for their production of carbon dioxide. Businesses would be ranked according to their green credentials, with the top of the list getting a refund plus extra cash, and the least highest performers being penalised.