Energy UK calls for VAT removal from energy bills and energy efficiency measures

The trade body says that would reduce bills by nearly £60 a year

  • It is also calling on the government to launch a new National Energy Efficiency Programme
  • Energy UK says there has been a fall in investment and energy-saving measures between 2012 and 2015
  • The trade body is also urging the government to provide policy clarity on the future of carbon pricing until at least 2021/22
By Priyanka Shrestha

The UK Government is being urged to help customers by removing VAT from energy bills and energy efficiency measures after Brexit.

Energy UK has published its submission to Chancellor Philip Hammond ahead of his Budget announcement later this month, where it suggests a zero-rate VAT would take nearly £60 off every customer’s bill and reduce the overall costs of energy-saving home products.

It adds the “regressive nature of successive governments” using the electricity bill to fund social policy programmes need to be addressed, ending the system whereby all customers, including those in or at risk of fuel poverty, pay for social and environmental programmes, “regardless of their ability to pay”.

That includes the Energy Company Obligation (ECO) and Contracts for Difference (CfD) schemes.

The trade body is also calling on the government to launch a new National Energy Efficiency Programme and provide policy clarity on the future of carbon pricing until at least 2021/22.

It says there has been a 53% fall – from £6.8 billion to £3.2 billion – in annual energy efficiency investment and 80% reduction in improvement measures between 2012 and 2015. – from 1.74 million to 340,000. According to latest research, a further decline is projected to 2020 and beyond without policy change and investment.

To support the national programme, Energy UK suggests the government to use green finance via the further rollout and availability of green mortgages – such a measure would avoid customers having to fund the total capital costs of energy efficiency measures upfront.

Green mortgages are typically offered at a small discount to a normal mortgage because they are linked to investment which improves the energy performance certificate (EPC) rating of a home and this is expected to reduce ongoing energy bills.

Chief Executive Lawrence Slade said: “We are calling on the chancellor to help energy customers with measures which will help reduce their bills and ensure that the continuing drive to reduce emissions across the whole economy comes at the least cost to households and businesses.

“Almost 80% of the cost of an average energy bill is outside suppliers’ direct control and with wholesale prices continuing to rise significantly, a National Energy Efficiency Programme would be the most effective way of keeping bills down in the face of such increases. Energy efficiency measures can cut bills by hundreds of pounds a year and help the most vulnerable customers who often pay a high price for living in the draughtiest homes.”

It is also urging for further decarbonisation by backing the development of charging infrastructure for electric vehicles (EVs) across the UK and fund large-scale trials on decarbonisation of heat.

Energy UK adds more than 80% of households are still dependent on gas boilers for heating and hot water and believes there is a “lack of clear direction” in terms of technical solutions.

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