Energy Secretary Ed Miliband has given the strongest hint yet that VAT on energy bills will be reduced, or even axed in order to help consumers.
While he refused to speculate ahead of the chancellor’s Budget in November he said there was “a need to address” the continuing pressures on households and “we’re looking at all of these issues”.
Labour has faced continuing criticism that bills continue to rise despite pledging to cut them by an average of £300 a year by 2030.
He said in a television interview that he stood by that promise but blamed the reliance on fossils.
“There is only one route to get bills down, which is to go for clean power, home-grown, clean energy, that we control, so we’re not at the behest of the petrol states and the dictators,” he declared.
However, there have been broad hints from government sources that cutting the current 5% rate of VAT is on the agenda. Removing it completely would save households an average £86 a year, though it would leave the Chancellor with a further headache over how to make up the £2.5b it would cost the Treasury.
A Treasury spokesperson said: “We do not comment on speculation.”
Power companies last week said government-imposed levies to pay for policies such as climate change and new nuclear building programmes were being borne by consumers. They make up around 16% of the average electricity bill.
Shadow energy secretary Claire Coutinho said her party’s plans would cut electricity bills for everyone by 20%.
“[The public] care about climate change but what I don’t think they are signing up for is much higher bills and jobs being lost to countries abroad,” she said.
Martin Pibworth, chief executive of Perth-base SSE, said expansion of the grid was vital to enable the benefits of renewables to be fully exploited.
“One of the reasons our bills have been so high is that the cost of electricity is linked to the price of gas, which is one of the most expensive fuels in the system,” he told The Times.
“But renewables are setting the wholesale price more and more of the time, bringing down the influence of gas on the power price.
“And as more renewables come online, like the world’s largest wind farm we’re in the process of commissioning at Dogger Bank, this effect is only going to increase.
“Some might look at a wind farm told to switch off and see waste. I look at it and see untapped potential. We’ve built the renewables where the resources are best. Now we’re upgrading the grid to use more of it, more of the time.”
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