Chancellor Rachel Reeves is planning to cut VAT on energy bills in an effort to mitigate the cost of living for everyday Britons.
It is understood the Chancellor told the Cabinet earlier this week to draw up proposals to tackle rising energy costs following the recent hike to Ofgem’s price cap.
“All options are on the table”, according to Ms Reeves, which apparently includes reducing the five per cent VAT charge on domestic energy bills to zero.
If implemented, it is estimated the move would save Britons about £86 annually and cost the Treasury around £1.75billion a year, under the current energy price cap.
The Chancellor is looking for ways to reduce energy costs for households
|
GETTY / PA
This policy is being floated ahead of the Chancellor’s upcoming Autumn Budget, which is set to be unveiled before Parliament on November 26.
Energy Secretary Ed Miliband has also been told to find ways to bolster energy savings for households, which Number 10 hopes can be included in the fiscal statement.
Department for Energy Security and Net Zero officials reportedly discussed multiple options earlier this week, including slashing green levies which are worth about £215 a year on average from household bills.
The Chancellor is under pressure over her tax and spending decisions as she attempts to address an estimated £41billion “black hole” in the UK’s finances.
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
How has the energy price cap changed?
|
GETTY
A Treasury spokesperson told The Times: “The Chancellor told cabinet that both she and the Prime Minister are determined to tackle inflation, address the cost of living crisis and get serious about bringing down energy bills.”
Earlier this week, research conducted by USwitch estimated that household energy bills are set to increase by £90million by the end of October as 41 fixed deals come to an end.
As a result, impacted households could see their costs jump by up to £202, as they will be automatically transitioned to their energy supplier’s standard variable rate if they fail to switch on time
Some 374,000 households are being urged to avoid this looming “bill shock” and save an estimated £241 by moving to a new fixed rate energy tariff as soon as possible.
MEMBERSHIP:
Will Owen, an energy expert at Uswitch, shared: “Households who signed up for a 12-month fix last autumn, or a 24-month deal in October 2023, should check when their switching window opens.
“Those whose tariff started around the end of October last year need to act quickly – as they can leave their current tariff up to 49 days before it ends without paying any exit fees.
“This is a particularly strong time for savings, with around 26 fixed deals currently available which beat the October cap and savings of around £241 on the market.
“If you’re on a standard tariff, now is the time to protect yourself from the upcoming price rise. Run a comparison to see what deals are available to you and how much you could save.”
LATEST DEVELOPMENTS:
Earlier this week, the Living Standards Coalition, which is convened by Lougborough MP Jeevun Sandher, called on Mr Miliband to examine the standard charge.
He claimed that lower-income households with lower energy use were being unfairly penalised by the status quo.
“Getting living standards rising is core to our Labour values and is the number one issue on which voters will judge this government.
“Getting these bills down quickly will make families better off. It’s why our party was founded, it is why we were elected last year.”