- Over 120 organisations, including many of the country’s largest businesses, trade associations and consumer groups, have sent a joint letter to the Chancellor calling for all taxes to be removed from electricity. Unprecedented coalition includes the CBI, Which?, AgeUK, Nationwide, the Co-op, the British Beer and Pub Association, UKHospitality, British Retail Consortium, MakeUK, techUK, LogisticsUK, and Community Union.
- Taking levies off electricity could lower business electricity prices by 20%, and save households another £100 per year helping to boost the economy and tackle surging fuel poverty as gas prices rise following conflict in Iran.
Over 120 organisations from across business and civil society have signed a letter to government warning high electricity costs risk driving business closures and job losses, and exacerbating cost of living challenges, unless government acts in the Autumn Budget to remove taxes on electricity.
The letter, co-ordinated by E3G and Energy UK, highlights that the UK’s energy costs are some of the highest of any developed nation, and 70% higher now than they were in 2021. It notes that this has been a significant contributor to household energy debt rising towards £7 billion and caused over 40% of British businesses to cut investment.
The conflict in the Middle East has pushed up gas prices considerably – at one point reaching a three year high. However, non-fuel costs such as government levies also push up energy bills. The signatories are calling for government to act on what it can control and would make a difference today – removing taxes from electricity.
The campaign has rapidly gained support beyond the energy sector, demonstrating the range of organisations for which electricity costs are now a key concern. 123 organisations have signed the letter, ranging from consumer groups like Which? and AgeUK, businesses including Nationwide and the Co-op, and associations representing sectors across the entire economy, including the CBI, MakeUK, techUK, the British Beer & Pub Association, British Retail Consortium, National Housing Federation, Food & Drink Federation and UKHospitality.
Over the last year, UK government has introduced temporary, partial tax discounts for domestic households, but has not gone far enough, and has done little for businesses. The Prime Minister announced a VAT cut on domestic electricity in his second day in office. Whilst this was welcome, the respite is short-lived, with this measure set to end in April 2027. This built on a more substantive electricity discount announced in last year’s Budget, but this is also temporary and due to expire in 2029. Even with these interventions, taxes still make up a tenth of the electricity bill for domestic consumers.
Businesses don’t benefit from either of the two discounts announced in the last year. Existing and incoming business electricity price discounts are limited to a small set of industrial and manufacturing firms, who greatly need the support but only account for 10% of non-domestic electricity consumption and less than 1% of the total number of companies.
The letter highlights that moving levies to the Exchequer would lower business electricity prices by up to 20% and bring the total average household energy bill reduction to as much as £250 a year (when including the previous intervention in the 2025 budget). This would deliver considerable economic benefits, boosting business investment and reducing inflation by 0.3 percentage points, which would save the government billions of pounds in future borrowing costs and inflation-linked spending. It would also significantly accelerate electrification of energy demand, which is critical to enhancing the UK’s energy security. Previous analysis by PwC found reducing electricity prices to the G7 median could drive an additional £250 billion of economic output over the next decade.
Quotes
Ed Matthew, Director of UK Programme at E3G, says:
“The UK is actively sabotaging its own efforts to bring down energy costs by taxing electricity. Any credible plan to tackle the cost-of-living and enable reindustrialisation needs to include moving these taxes permanently from bills to the Exchequer. The scale of support for this letter shows that this demand has united the country. The government must now act.”
Dhara Vyas, Chief Executive at EnergyUK, says:
“High electricity prices hurt all of us. By taking levies off the bill, the Government can show it is serious about tackling fuel poverty and the cost-of-living crisis, growing the economy, and bringing down inflation. Cheaper electricity would have an outsized impact across the economy, encouraging the switch to electric heating, transport and industry and allowing households and businesses across the UK to feel the benefit of the successful rollout of clean power.”
Available for comment
Ed Matthew, Director of the UK Programme, E3G
m: +44 (0) 7827 157906
e: ed.matthew@e3g.org
Notes to Editors
- The letter was co-authored by Energy UK and the E3G-led Electricity Bills Taskforce.
- The UK Electricity Bills Taskforce brings together experts from over 30 organisations across academia, industry and civil society. The taskforce is exploring options for minimising costs across all components of the bill – whether that is energy production, network costs, levies, system operation or supplier costs.
- The Taskforce is set to publish a full report later this year, setting out a wider range of recommendations on how to reduce electricity costs. The letter focusses on their top recommendation – removing unfair hidden taxes – which is the largest immediate action government can take to reduce bills.
- Examples of taxes which the Electricity Bills Taskforce advocates removing from bills includes: the Renewables Obligation, the Feed-in-Tariff, the Warm Homes Discount and the Nuclear levy. Removing these taxes from bills would reduce electricity bills for most non-domestic consumers by over 20%. Domestic consumers currently have a 75% discount on the Renewables Obligation until 2029. Removing the remainder of this levy, as well as the others mentioned above from electricity, would immediately reduce the average household bill by an additional £100 per year, bringing the total savings to almost £200 per year in 2029 onwards. Shifting these levies from both domestic and non-domestic bills would transfer £10bn a year in hidden costs from bills to the exchequer.
- Energy UK and the CBI jointly published a report earlier this year looking specifically at business energy costs. This report also recommended the removal of levies from electricity.
- Good Energy published a report in June which assesses the potential for reductions in taxes on electricity to deliver reductions in inflation.
- E3G is an independent climate change think tank with a global outlook. We work on the frontier of the climate landscape, tackling the barriers and advancing the solutions to a safe climate. Our goal is to translate climate politics, economics and policies into action. About – E3G
- For further enquiries email ed.matthew@e3g.org or phone +44 (0)7827 157906
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