Average household energy bills will fall by £150 a year from April, Rachel Reeves said on Wednesday – but she will heap some costs on to the taxpayer.
The Chancellor said she would scrap an ‘eco scheme’ and partially move green levies from bills on to general taxation.
Despite the move – and Energy Secretary Ed Miliband’s pledge to reduce energy bills by £300 over this parliament – energy charges are still £190 higher than when Labour came to power.
Ms Reeves told the Commons she would scrap the energy company obligation scheme introduced by the Tories – which forces energy companies to pay for measures such as insulation and new heating systems for low-income households – in April.
She said: ‘It costs households £1.7billion a year on their bills and for 97 per cent of families in fuel poverty, the scheme has cost them more than it has saved. It is a failed scheme.’
But she also increased funding for the warm homes plan by £1.5billion to ensure those households don’t lose out.
In a sleight of hand that enables Ms Reeves to argue she’s reduced bills, some of the rest of the saving will be made by transferring costs for another scheme on to general taxation.
She will also cut by 75 per cent the cost suppliers have to pay for certificates to show they have sourced electricity from renewable projects, the Renewables Obligation.
Average household energy bills will fall by £150 a year from April, Rachel Reeves said on Wednesday – but she will heap some costs on to the taxpayer. Pictured: Ms Reeves, pictured on Budget day
Despite the move – and Energy Secretary Ed Miliband’s pledge to reduce energy bills by £300 over this parliament – energy charges are still £190 higher than when Labour came to power. Pictured: Energy Secretary Ed Milliband during a visit to an engineering workshop in Anglesey
But these costs will temporarily be picked up by the taxpayer for the next three years when the relief will become the responsibility of energy companies once more.
The UK’s fiscal watchdog, the Office for Budget Responsibility, said this would mean higher borrowing.
While Ms Reeves claims that these changes will trim bills by £150, UK policy think-tank Nesta and energy consultancy Cornwall Insight Ltd calculate the saving at closer to £135, Bloomberg reported.
Without the interventions, the price cap, set by regulator Ofgem, is set to reach £1,758 a year in January, around 12 per cent higher than the £1,568-a-year level it was at when Labour came into power, despite Mr Miliband’s pre-election pledge to cut bills by £300.The high cost of energy
bills includes the price of subsidising renewable energy which Labour is banking on to provide cheaper energy in the future.
Conservative energy spokesman Claire Coutinho said energy bills had gone up since Labour came to power due to Mr Miliband’s ‘obsession with Net Zero’, adding: ‘Labour promised to cut energy bills by £300 but they’ve gone up by £200 since they came to power.
‘This is a sleight of hand from Rachel Reeves, who is giving with one hand but taking with the other as taxes go up to pay for the cut in bills – robbing Peter to pay Peter.’
