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U.K. Should Cut Energy Tax for Consumers, Industry Group Warns

U.K. Should Cut Energy Tax for Consumers, Industry Group Warns

The government could protect consumers from surging energy costs by eliminating the value-added tax on bills, the industry group Energy & Utilities Alliance said on Monday.

British households are facing a steep hike in energy bills after wholesale gas prices have jumped almost six-fold in the past year. The government has vowed to keep the country’s energy price cap in place to protect consumers but that may not be enough, especially as the price cap will almost certainly increase when its revised in February next year.

“Scrapping VAT on energy, as a temporary measure, will immediately reduce the bills of hard-pressed households,” said Mike Foster, chief executive officer of the Energy & Utilities Alliance. “Consumers are genuinely worried about paying so much more to keep warm. The choice of ‘heating or eating’ is one that no one should have to make.”

Over the weekend, Business Secretary Kwasi Kwarteng re-iterated his support for the price cap staying in place. Further changes to consumer bills could come with a shift in charges that support green energy to gas bills from electricity where they’re currently charged. That would lower electricity costs and incentivize people to switch away from using gas for home heating and cooking. 

But that shift could also hurt consumers in the short term, according to Andy Prendergast, national secretary of GMB Union, which has over 500,000 members. 

“The decision to tax users ignores the necessity of gas for most homes, or its importance to industry,” Prendergast said. “At a time of rocketing gas prices, the last thing either the public or business need is extra taxes on what is an essential utility.”

©2021 Bloomberg L.P.