Overview
- Chancellor Rachel Reeves is considering options for the 26 November Budget that include cutting the 5% VAT on domestic energy, reducing standing charges, and shifting policy levies off bills.
- Scrapping VAT would trim the average bill by roughly £44 to £85 a year, with an estimated Treasury cost of about £1.75 billion.
- The Resolution Foundation proposes funding programmes such as the Energy Company Obligation and Warm Home Discount through general taxation, projecting net gains of around £110 a year for the poorest fifth of households.
- Transferring wider legacy renewables costs like the Renewables Obligation and Feed‑in Tariff to the Exchequer could save households over £100 on average this year at a public cost of roughly £3 billion, rising to about £4.3 billion initially if all targeted measures are moved.
- Experts caution that cutting green levies could undermine long‑term decarbonisation even as bills remain about £600 above pre‑war levels, while reducing standing charges would favor low‑use households but could raise per‑unit prices for higher‑use and often vulnerable consumers.