British businesses are calling on Chancellor John Healey to transfer levies from electricity bills to general taxation. This move is aimed at reducing the burden of high energy costs on industries ranging from chemicals to steel, as well as on households. UK consumers currently pay various fees on their electricity bills which fund renewable projects and other energy and social policies, in addition to wholesale costs. The government has already begun shifting some of these fees into general taxation to ease the financial pressure.
According to a report by the Confederation of British Industry and Energy UK, industrial electricity costs in the UK are 45% higher than the G7 median, placing British businesses at a significant disadvantage compared to international competitors. High energy prices are recognized as a major constraint on the economy, contributing to business closures, job losses, and deterring investment. Many households are also struggling, with 85% expressing concern about energy bills and domestic energy debt projected to reach $7 billion this year.
Moving these electricity levies to government spending could lower business electricity prices by up to 20% and reduce the average domestic energy bill by as much as $250 annually. For low-income households, particularly those with electrically heated homes who are twice as likely to experience fuel poverty, this shift could save up to $420 per year. Furthermore, it is estimated that reducing electricity prices to the G7 median could generate an additional $250 billion in economic output over the next decade and potentially lower CPI inflation by 0.25 percentage points in 2026/27.
Over 120 organizations, including major industry groups like Make UK and the Confederation of British Industry, have urged the Chancellor to take this action. They argue that this change would not only make energy costs more affordable and competitive but also address distortions hindering investment in electrification, improve UK energy security by promoting homegrown power generation, and reduce reliance on energy imports. While the government has temporarily removed VAT from domestic electricity bills, businesses emphasize the need for more permanent interventions to tackle the issue of high and unstable energy prices.
