Chancellor Rachel Reeves has announced the removal of certain green levies from energy boost in a boost to cash strapped households
Millions of households will save an average £150 on their energy bills next year by removing add-ons.
Chancellor Rachel Reeves confirmed that she was ditching the Tories’ energy company obligation, a home insulation scheme which adds around £43 to the average bill, next April.
Documents from the Office for Budget Responsibility also show another levy the renewables obligation will be partly removed, at least temporarily. It currently adds around £90 to the average annual gas and electricity bills. The temporary removal will cost the Treasury £3billion next year, and then £2billion a year until 2028/29.
However, the Chancellor opted not to ditch the 5% rate of VAT on energy bills, which would have save another £84 on average.
Consumer champion Martin Lewis, founder of Moneysavingexpert.com, said: “I’m also hopefully in future we may get some costs off the standing charges, but that hasn’t happened yet.”
The help with energy comes as millions of households are set to see their energy gas and electricity tick up to £1,753 a year from April 1. Regulator Ofgem said the slight rise in its price cap was all to do with government policies, rather than wholesale energy costs.
Experts had been predicting another rise in the cap next April, so the removal of some of the add-ons will hopefully mean a big saving.
Labour sources say the fact that six million families are getting the £150 Warm Homes Discount means the party can claim – at least for those households – that it has met its manifesto pledge to cut energy bills by £300.
Caroline Abrahams, director at the charity Age UK, said: “Energy bills are a huge worry for many older people and so any additional help from the Government is very welcome.”
Adam Score., National Energy Action chief executive, said: “Despite the welcome news that the two-child benefit cap is being scrapped and £150 lifted from energy bills, the Budget has blown a huge hole in the government’s strategy to tackle fuel poverty.
“By scrapping the ECO scheme with no successor and no Warm Homes Plan yet in sight, the Treasury has removed the only national scheme focused on fuel poor homes, outside of the social housing sector. Until the government’s Warm Homes Plan is released, there now isn’t a plan for how to end fuel poverty.”
He added: “Today is National Energy Action’s Fuel Poverty Awareness Day – and we’re highlighting the six million children living in fuel poverty across the UK. I thought it falling on the same day as the Budget was coincidence. It now feels fateful.”
The OBR forecast lower energy bills will also help bring down inflation. It estimates inflation will average 3.5% this year – peaking at 4% around now – and then fall to 2.5%.
A report last month from the National Audit Office was scathing about the energy company obligation scheme. It found tens of thousands of UK homes fitted with energy efficiency measures under the government scheme have developed “major” faults such as damp and mould.
In some cases the problems are so serious they pose “immediate health and safety risks,” the NAO warned in a damning report. It also revealed issues with the scheme may have led to up to 16,500 false claims, totalling as much as £165million worth of suspected fraud. Campaigners have said the scheme has been exploited by “cowboy” tradespeople.
Ami McCarthy, head of politics at Greenpeace UK, said: “The Chancellor is playing energy-policy whack-a-mole – with some genuinely welcome decisions, and others as short-sighted as the little velvety tunnelers themselves.
“Shifting most green levies into general taxation is great news for billpayers and will fund long-term bill-saving schemes far more fairly. Holding firm on the oil and gas windfall tax, despite fierce industry lobbying, will also continue to support the transition to clean energy.
“But cutting the insulation programme and funding risks leaving millions of households in fuel poverty, trapped in cold, damp homes. The energy efficiency scheme desperately needed reform – including stricter rules to stop shoddy work by cowboy installers – but scrapping it outright will prove counter-productive.”