Energy bills ‘could fall by £250’ as 123 firms call for ‘hidden taxes’ to be scrapped (Image: Getty)
Households could save up to £250 per year on their energy bills if the Government removes “hidden taxes” from electricity bills, a new campaign has warned. More than 120 organisations, including consumer groups and major industry bodies, have called on ministers to act in the Autumn Budget to cut Government levies loaded onto electricity bills.
The coalition of 123 organisations says high electricity costs are putting businesses at risk of more closures and job losses. The letter, coordinated by Energy UK and E3G, warns that UK energy costs are among the highest in the developed world, and are now 70% higher than in 2021. It says soaring costs have contributed to household energy debt approaching £7billion, while more than four in 10 British businesses have cut investment. Dhara Vyas, chief executive of Energy UK, said: “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.
Prime Minister Andy Burnham announced a VAT cut on domestic electricity bills in July (Image: Getty)
“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.”
Energy bills have been driven higher by a combination of expensive gas and non-fuel costs, including Government levies “which contribute a significant proportion to the bill”, the letter argues.
Gas prices have also risen sharply amid the conflict in the Middle East, at one point reaching a three-year high. But campaigners argue ministers can tackle the part of the bill they can control by moving electricity levies to the exchequer.
By doing so, they estimate that business electricity prices could drop by up to 20%, while the average household energy bill could be reduced by as much as £250 per year, when combined with the intervention announced in the 2025 Budget. This saw a restructure of how certain green and social schemes are funded, removing several policy costs from energy bills. This was estimated to have cut energy bills by between £130 and £150 a year from April 1, 2026.
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Many major organisations have backed the calls to remove levies, including Which?, Age UK, Nationwide and the Co-op. Other major business groups, including the CBI, Make UK, techUK, the British Retail Consortium, Food and Drink Federation, and UKHospitality, have also signed the letter.
Campaigners say previous Government measures have not gone far enough. This includes Prime Minister Andy Burnham’s VAT cut on domestic electricity bills and the restructuring of funding for green and social schemes.
They are urging the Government to use the upcoming Autumn Budget to make a more permanent reduction in electricity costs.
Ed Matthew, director of UK programme at E3G, said: “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 removing these taxes 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.”
A Government spokesperson said: “The Chancellor is fully focused on giving families and businesses breathing space and helping ease cost pressures.
“That’s why we have removed VAT from electricity bills and are reducing electricity costs by up to 25% for more than 10,000 manufacturing businesses through our British Industrial Competitiveness Scheme.”
