UK households could receive a £250 boost if the Chancellor announces a major tax change in his Budget, an expert has said. John Healey will outline his plans to MPs on October 28, with speculation mounting over possible measures, including moving energy levies into general taxation.
Over 120 organisations call for energy levy change
Madeleine Porter, head of marketing at Utility Bidder, said: “Rising energy costs remain a major concern for businesses and households with over 120 organisations calling on the Chancellor to move energy levies into general taxation, which they say could cut household bills by around £250 a year and reduce business electricity costs by up to 20%.”
With the October price cap set at £1,723 for a typical household and the threat of further price increases if wholesale gas prices remain high, many households will be looking to the Government for additional support. “We therefore expect to see some targeted measures aimed at helping lower-income and more vulnerable households manage their energy costs,” Ms Porter said.
Budget should support energy efficiency
“Reducing energy bill costs only acts as part of the solution, and the Budget should also look to offer support to households and businesses in reducing their overall energy consumption. Recently, the Energy Security and Net Zero Committee report highlighted the need for the Government to reduce exposure to volatile international energy markets, while also helping households and businesses cut their energy use.”
Grants, tax relief and incentives for measures like insulation and heat pumps could help reduce energy consumption, while also “providing longer-term protection against unstable energy prices”, she added. For businesses, particularly smaller ones, access to support in the Budget will be important.
“While schemes such as the British Industrial Competitiveness Scheme have been designed to help manufacturers reduce their electricity costs, many smaller businesses are continuing to face major energy pressures,” she said. The Budget should expand access to energy-efficiency incentives and make existing support easier for small and medium-sized businesses to access.
“Energy support in the Budget should also focus on providing businesses with greater certainty. Clearer long-term policy and incentives laid out in the Budget could provide businesses with more confidence to invest in their energy efficiency and on-site generation, which would reduce their exposure to volatile prices in the years to come,” Ms Porter added.
Previous Budget moves and VAT cut
It comes after Mr Healey's predecessor, Rachel Reeves, announced in last year’s Budget that renewable energy levies and green policy costs would be moved off household bills and funded instead through general taxation. The Government's removal of VAT from electricity bills started on October 1.
The tax cut will “help households with their energy bills by taking around £45 off the yearly Ofgem price cap” and is “part of Prime Minister’s wider plan for ‘everyday fixes’ to give families some breathing space”, the Government said.
Mr Burnham said: “For many families, the energy bill is the one they dread the most. I don’t accept that it has to be this way, and I am determined to bring down costs for good. But I know people can’t wait. Families need breathing space now. That’s why, from today, VAT is gone from your electricity bill. And we’re going further, capping bus fares at £2 from January and cutting business rates for pubs, social clubs and live music venues.”
