What could the UK Government do to support people now?
Though it will be difficult for the UK Government to tackle the root causes of high energy bills, it must step in now to ease the pain of high bills for consumers.
It can do this in several ways, such as further support payments to reflect higher bills (potentially paid for with further windfall taxes on the high profits of oil and gas companies), temporarily cutting VAT on energy bills, an ‘energy furlough scheme’, or temporary renationalisation of energy companies that cannot offer bill reductions.
It’s also essential that the government works to reduce the energy used in our homes by supporting a national programme of energy efficient retrofit.
What about a windfall tax on the big companies that produce our oil and gas?
The previously announced windfall tax on energy producers will help to cover the £400 discount on energy bills for households. It’s also being used to help eight million low-income households, who will receive a one-off payment of £650, as well as increased support for pensioners this winter and a one-off payment of £150 for those with disabilities.
However, since the windfall tax was announced, price cap estimates have increased dramatically, as have the predictions for future energy company profits to £170bn over the next two years, so the money raised from the tax is now being seen as not enough to help households with rising costs.
The government could increase the windfall tax on these companies in the future to give more support to households.
What is the ‘green levy’ on energy bills?
‘Green’ levies refer to the social and environmental policy costs that make up part of our energy bills. These policies either support investment in renewable energy, help with social issues such as fuel poverty, or both. For example, the Energy Company Obligation, which supports insulating homes to cut bills, is funded by green levies.
It is vital the programmes these levies support are not scrapped completely, as they play an important role in supporting vulnerable households by delivering energy efficiency measures and investing in renewable energy.
The UK Government’s recent announcement made clear that these levies would be removed ‘temporarily’, with the cost of these important programmes met by the Treasury for the time being.
Will cutting VAT on energy bills help to bring down costs?
While temporarily cutting VAT on energy bills would take some much-needed pressure off bills, it will not be enough on its own to help all households. A much wider package of support is needed.
The government’s recent energy price freeze at £2,500 does help to mitigate further price rises, but there are still questions about how some households (eg those off the gas grid) will be supported. With average prices frozen at £2,500, this will still leave many thousands of households in fuel poverty.
Are energy suppliers charging us more for our bills just because they can?
No, the wholesale price of gas on the global market is driving the price rise.
What’s the long-term solution to this crisis?
The best way the government can bring bills down is to reduce our reliance on fossil fuels.
We’re calling for them to invest more in renewable energy, which is significantly cheaper than gas, and provide nationwide support to insulate our homes.