Green levies on energy bills should be suspended to help alleviate the pressure on household bills, a former minister has said.
Robert Halfon MP, Conservative chairman of the Commons Education Committee, said the move could provide struggling consumers with a saving of almost £200 on their annual bills as they face rising energy prices due to sky-rocketing wholesale gas costs.
It comes after Prime Minister Boris Johnson dismissed calls to scrap VAT from household energy bills during a press conference on Tuesday as some experts predict the energy price cap – which is currently protecting consumers from bill rises – could increase by up to 50% in April.
There is an elephant in the room, and that is the so-called energy tax green levies which amount to 25% of the electricity bill that we all payRobert Halfon MP
Mr Halfon said energy bills could potentially rise to between £1,800 and £2,000 per year, a hike which “could cause enormous financial distress” and put two million more people into fuel poverty.
“The Government must do what they can to reduce energy bills – of course reducing VAT would help and it is an important gesture,” he told BBC Radio 4’s World At One programme.
“But there is an elephant in the room, and that is the so-called energy tax green levies which amount to 25% of the electricity bill that we all pay.”
The Harlow MP said ministers should “at least suspend green levies” while global gas prices are high, or put in place a “downward escalator” to ensure green taxes on bills decrease when wholesale energy prices increase.
The former education minister said a VAT cut would amount to a saving of about £60 this year on average for bill payers, but that a suspension of the green levies could reduce costs by a quarter, stating that the average consumer spends about £195 annually on “environmental and social costs” of energy.
“It would make a significant difference,” Mr Halfon added.
But his argument was challenged by the chief executive of the Resolution Foundation, Torsten Bell, who said targeting green levies was a “slight red herring that’s being pushed by people who don’t want to wrestle with the actual tough decisions we face in the short-term”.
The think tank chief told the World At One that suspending green levies “isn’t the answer to the short-term pressures we face” as most of the levies relate to “past contractual issues” to do with renewable energy rather than addressing the high gas prices currently being experienced.
Mr Bell, a former Labour Party adviser, said the Government could be required to provide financial support to consumers to deal with the rising cost of living being fuelled by energy price hikes.
“I think we should instead just bite the bullet and recognise that what we are going to need to do is to outright reduce the size of the energy price cap increase, and that will require taxpayer funding to do it,” he added.
“We can either do that by directly subsidising the suppliers so that they can charge us less for electricity or gas, or we can do it, as some other countries have done, via a rebate where the Government is directly providing money off early bills in 2022 for consumers.
“They will still see the price cap increase happening but they will have some support in paying those first bills.”