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Levies on bills: let's tackle the fundamental problem

04 Mar 2014

The cost of government levies on energy bills was back on the agenda this week as a group of MPs on the Energy & Climate Change Select Committee debated how these costs are monitored and accounted for.

Government social and environmental policies paid for through energy bills include things like the Warm Home Discount yearly rebate for vulnerable customers, the Energy Company Obligation (ECO) scheme for improving the energy efficiency of certain types of housing, and financial subsidies for the generation of low-carbon electricity through the Renewables Obligation (RO) and Feed-in Tariffs (FiTs).

We support the aims behind these schemes - to reduce carbon emissions, provide support for the vulnerable and cut our energy consumption - but ultimately it's customers who pay for them, so it's only right that their costs are regularly monitored, assessed and scrutinised.

And while it's important that the cost of these programmes are kept in check, we believe a more fundamental shift is required to make the whole system fairer for consumers.

At the moment, these policy costs are spread across all energy bill payers, regardless of their income or ability to pay for them. This is a regressive approach which means those on lower incomes have to contribute proportionately more towards the schemes than others.

There is a much fairer and progressive solution: remove government levies from energy bills and pay for these policies through general taxation instead. This could cut a typical dual fuel energy bill by around £100 a year.

Taxation is means-tested, meaning that the amount you pay is proportionate to your earnings and the most vulnerable in society are protected. This approach has widespread support from consumer groups and charities.

The key issue here is that no matter how tightly policy costs are controlled, the current approach to paying for them isn't fair.