Key facts
- Over 120 organizations urged the UK chancellor to remove levies from energy bills.
- The levies amount to 10% of energy bills and fund various policies.
- Removing levies could lower average household bills by £250 annually.
- Business electricity prices could fall by 20%.
- UK energy bills are 70% higher than in 2021.
- The government has a pre-election promise to cut energy bills by £300 a year by 2030.
More than 120 organizations, including major businesses and charities, have urged the UK chancellor to remove what they describe as “hidden taxes” from energy bills. In a letter to be presented by John Healey on October 28, signatories such as Energy UK, the CBI, End Fuel Poverty, and Age UK are calling for levies that fund various policies to be paid for by the government instead of being added to consumer bills. These levies currently account for approximately 10% of energy costs.
The organizations propose that the government should cover the costs associated with building renewable energy projects, nuclear power plants, the warm homes discount scheme, and the feed-in tariff programme. Last year, the former chancellor Rachel Reeves shifted 75% of the funding for green energy schemes to general taxation. The signatories argue that removing these levies would reduce the average household energy bill by as much as £250 annually, and lower electricity prices for businesses by 20%.
Ed Matthew, director of UK programme at thinktank E3G, which co-authored the letter with Energy UK, stated that the UK is "actively sabotaging its own efforts to bring down energy costs by taxing electricity." He added that any credible plan to address the cost of living and support reindustrialization must include removing these taxes from bills. Octopus, Britain's largest energy supplier, had previously warned that bills could increase by 20% over the next four years due to rising policy costs, even if wholesale prices decreased.
The call comes amid soaring gas and electricity prices, with households facing the highest energy charges in three years this winter, partly due to the conflict in Iran. Cornwall Insight forecasts that the UK regulator Ofgem will raise its quarterly price cap again in January, potentially setting the average annual bill at £1,872. The government is under pressure to address the high energy costs, which are among the highest globally, and to fulfill its pre-election promise to cut energy bills by £300 annually by 2030.
Energy UK’s chief executive, Dhara Vyas, emphasized that cheaper electricity would have a significant positive impact across the economy, helping to tackle fuel poverty, the cost-of-living crisis, and inflation. The letter also highlighted the detrimental effect of high energy costs on businesses, citing them as a major constraint leading to closures and job losses, and deterring investment in the UK. In July, Andy Burnham announced a VAT cut on domestic energy bills, expected to save households an average of £45 from October, though this reduction is currently set to last only until April.