A coalition of 123 organizations, including major businesses, banks, retailers, and charities, has formally requested that the government remove “hidden taxes” from energy bills. The group, which includes Energy UK, the CBI, End Fuel Poverty, and Age UK, argues that these levies—which account for roughly 10% of total energy costs—should be funded directly by the government rather than through consumer bills.
The proposal comes ahead of Chancellor John Healey’s first budget, scheduled for October 28. Supporters of the move claim that shifting these costs would reduce the average annual household energy bill by as much as £250. This figure includes the £150 in savings already achieved through former Chancellor Rachel Reeves’s decision last year to move 75% of such funding to general taxation.
Beyond household relief, the signatories argue that the change would lower electricity prices for businesses by 20%. Ed Matthew, director of the UK programme at the thinktank E3G, stated that the UK is currently “actively sabotaging its own efforts to bring down energy costs by taxing electricity.” He emphasized that removing these charges is essential for any credible plan to address the cost of living and support reindustrialization.
The letter specifically calls for an end to levies that fund nuclear power plant construction, the warm homes discount scheme, and the legacy feed-in tariff programme. While the latter was closed in 2019, it continues to provide payments to businesses and customers with existing contracts for generating their own energy and supplying excess power to the grid.
Energy UK chief executive Dhara Vyas noted that high electricity prices affect everyone, adding that removing these levies would demonstrate a serious commitment to tackling fuel poverty, inflation, and economic growth. The coalition warned that current high energy costs are a significant constraint on the economy, contributing to business closures, job losses, and a decline in investment.
The pressure to act is mounting as UK energy bills remain 70% higher than they were in 2021. Recent market analysis from Cornwall Insight suggests that regulator Ofgem will increase the quarterly price cap in January, pushing the average annual bill to £1,872. Furthermore, Britain’s largest energy supplier, Octopus, previously warned that bills could rise by 20% over the next four years due to the increasing costs of government policies, even if wholesale energy prices were to fall.
The government is under significant scrutiny to address these costs, which are among the highest in the developed world, following a 2024 pre-election pledge to reduce energy bills by £300 a year by 2030. While Andy Burnham announced a VAT cut on domestic energy bills in July—providing an average saving of £45 starting in October—this measure is currently slated to expire in April. The report also notes that more than 120 organisations including big businesses and charities have called for the removal of “hidden taxes” added to energy bills to help reduce costs for consumers and prevent businesses closing. The report also notes that the signatories want the remainder of the levy funding the building of renewable energy projects to be scrapped. The report also notes that the outbreak of the Iran war has pushed gas and electricity prices up with households facing the highest energy charges in three years this winter. The report also notes that cheaper electricity would have an outsized impact across the economy.”.
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