UK households could save £300 on bills if politicians scrapped little-known tax | Personal Finance | Finance
The high cost of electricity in the UK is pushing people into fuel poverty and holding back the green transition. We can change that by removing outdated taxes on electricity. In Britain we currently pay more for electricity than almost anywhere else in Europe. That’s not because our electricity is more expensive to produce. Far from it: we actually generate more cheap renewable energy than most European countries. The problem is the taxes placed directly onto consumers’ electricity bills.
These social and environmental taxes add around 16% to an average household’s annual electricity bill. When Tony Blair’s Labour government introduced the taxes in the early 2000s, it made sense to directly tax electricity. Back then, electricity mainly came from fossil fuels which pollute our planet. Now, though, we want to be encouraging people to use electricity instead of gas, because electricity is much greener and cheaper to generate from renewables.
For the vast majority of homes, switching away from gas will mean getting an electric-powered, energy-efficient heat pump. Heat pumps can be four times as efficient as a gas boiler, but because electricity costs around four times as much as gas in this country, consumers don’t get the full savings that heat pumps can offer.
So removing the taxes from electricity would make heat pumps the cheapest option for heating your home as well as the greenest.
And at the same time, it would help tackle the fuel poverty that millions are currently facing.
The most vulnerable, including the elderly, are much more likely to have direct electric heating (for example electric radiators). So they pay far more on taxes than those with gas boilers, punishing those who have no choice.
When you add together the green arguments and the urgent need to tackle fuel poverty, it is clear that taxes placed directly on electricity must go. The fairest and most sustainable thing to do is to move the cost into general taxation. This would mean savings of up to £300 a year for households with heat pumps or electric heating, and around £130 a year for dual fuel customers, while making sure those most able to pay do so and the poorest are protected.
You can write to your MP to call for taxes on electricity to be removed at: https://mcsfoundation.org.
