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Chancellor – give back extra VAT to help tackle fuel poverty

George Osborne conference speech

We’re asking George Osborne to pay back the extra £200m VAT revenue gained from energy price hikes. With crucial schemes like Warm Front set to close, wouldn’t this money help those struggling this winter?

Last month, the Prime Minister got energy suppliers and consumer groups together for a summit to help people struggling with their energy bills.

Which? welcomed the government’s attention, but pointed out that this was only the start of tackling rising energy bills.

Government – give something back

This week, we wrote to the Chancellor, ahead of his ‘Autumn Statement’ on 29th November, to ask for a £200m boost in funding to make people’s homes warmer this winter.

Our justification for this call is straightforward. Following the summit, consumer groups committed to do more to help people with simple steps they can take to switch supplier, insulate their homes and save money.

Meanwhile, some energy companies are offering free insulation or promising no further price rises until next summer. Yes, the companies need to go much, much further – but it’s a start.

But what about government? Shouldn’t they also dip into their pockets and help? Especially when the recent energy price-hikes have resulted in an estimated £200m extra going in to the Treasury’s coffers through VAT receipts.

Yes, the government has a huge budget deficit to pay down, but they also have a duty to relieve the pressure on energy bills. After all, consumers tell us that energy prices are their number one financial concern. So rather than simply putting this windfall back into the general pot, shouldn’t they plough it into schemes that will keep bills down?

Invest in energy efficiency

Installing energy efficiency is often the best way to cut your energy bill. The Energy Savings Trust reckons that an un-insulated three bedroom house could save up to £310 a year by insulating the loft and cavity walls. And poorly insulated homes are also responsible for many illnesses and deaths in the UK. Plus, the cost of winter-related disease to the NHS is estimated at £859m each year.

But it’s not always easy to afford these kinds of house improvements. There are government programmes to help people to access free or heavily subsidised insulation. But one of these programmes – Warm Front – is due to end in 2013 despite huge interest – so much that it had to close early to new applications in 2010.

There are thousands of households that have benefited from free or subsidised insulation through Warm Front and other schemes, but thousands more will miss out once the scheme closes. To us, this is the perfect place to pay back some of that extra £200m.

Have you or someone you know had energy efficiency measures installed this way? Do you think that energy efficiency schemes like this from the government are a good way to spend money? And what more do you think the government should do this winter to help?

Dennis says:
24 November 2011

I pay for my energy by monthly direct debit and mistakenly thought that as it is the cheapest way, everyone paid in this way. No matter how cold the weather, I pay no more in winter than the rest of the year. Anyone who cannot afford to heat their homes taking into account the £200 winter fuel payment must be on the wrong payment arrangement and changing this would help.

Snowdin says:
24 November 2011

My personal view is that VAT is a disproportionate hit on the poor, therefore if there is a payback it should be targetted in some way at the poor. Zero VAT on energy might be the fairest way. The hidden charges for solar energy production within utility bills was a subsidy by the poor of long term income returns of the middle classes who could afford solar panels. I think that this was unsustainable but I totally agree with previous comments that this sort of thing needs adult long term joined up thinking and not the sudden decimation of an industry.

Dunc Wooster says:
24 November 2011

I would like to see the extra £200m directed into alleviating the suffering of people who are experiencing real hardship as a result of the cost of heating, and the Warmfront programme may be the best way to do this.

However, I think a much higher priority is for the government to protect the poorest and most vulnerable consumers from the risks to their health and welfare and even, in the cases of invalids and the elderly, their lives.
A major step in the right direction would be forcing energy companies to urgently restructure their pricing schemes so that
(a) the poorest do not pay the highest prices due to their exclusion from credit tarriffs, direct debit facilities and internet & web access, or their lack of expertise in shopping around to evaluate the cheapest contracts, etc
(b) initial units consumed are lower priced than subsequent units so that those who use the least are rewarded by lower prices, and those who use the most are motivated to reduce consumption

I am pleased to hear Which? is acting on the unacceptable matter of the swift cut off PROPOSAL before the end of the consultation period, Nicki.

However, when I raised the issue of the morality of the poorer members of society subsidising the better off for the Live PV Solar Panel online discussion, it was ignored. Instead, if my memory serves me well, Which? suggested that pv solar was only a good investment if you re-invested the FiTs in ISAs. That was before any reduction was announced. I would have thought Which? would be assessing it now with its halved rates as a poor, high risk, if ecologically beneficial, investment. Unlike a normal savings investment, the capital is never returned with the interest. Morally, it could instead be funded through general taxation on income, like most other things.

The flip side of the morality issue is clearly explained by Chris on the link you suggest above


in which he details the costs of various options for producing energy to all consumers and the green benefits of pv solar.

I appreciate the suggestions for reducing energy costs, but believe that unless the government force landlords to insulate and double-glaze their properties, the poorer members of society will remain cold even to the point as Dunc says to the loss of life. The very poorest are the homeless, another matter for the government to act upon urgently. The £200 would benefit them most, wouldn’t it?

Dunc’s suggestions would be a good place for the government to start.

I entirely agree – the government should apply this additional revenue to bring the energy suppliers back into line – it is ridiculous that gov makes so much money when so many people struggle to heat their homes
Which? must keep up the pressure on gov on this issue.

Long John says:
25 November 2011

The £200m should be used in some way to improve energy efficiency and reduce our carbon footprint thus reducing the need for expensive and ineffective wind farms and solar panel installations. The true carbon footprint of a typical wind farm installation plus all of the infrastructure footprint and the base load generation and inefficiency.
I can heat my home considerably cheaper with gas than electricity, of which 48.9% is generated from natural gas. Why not use the VAT to expand the gas distribution network and take some of the heating load away from the electricity companies and expensive oil and LPG.

Geoffrey Wells says:
26 November 2011

I’m all for anything which helps to cut down energy usage such as cavity wall insulation, but what about those of us living in older houses without cavity walls? How can we benefit?

I have a friend who is receiving Guaranteed Pension Credits. Because financial assistance is no longer available to install double glazing, she is unable to pay for it herself. She worked part-time hours to look after her elderly father and so has been penalised for saving the State money for his care. Why can’t the additional VAT be allocated to people like her, in fuel poverty, to improve the insulation in her home?

Well said, Jay! Geoffrey, my cavity wall insulation is the sort that can’t be topped up, but I had my roof insulated and the house really retains its heat now. It involved lifting the attic floor boards and building up the joists because the new layers are so thick. There are grants though I’m not sure who qualifies. An elderly neighbour who had never had central heating had it put in free by British Gas. I think there are many possibilities…

George Osborne the Chancellor of the Exchequer, should never have raised VAT to 20% in the first place, a cut to 15% would have helped the economy more, BUT, perhaps that would have meant getting to grips with the Banks to repay what that so greedily took away from us, by not paying their full tax bills. Has anyone noticed the uncanny resemblance between George Osbourne and ‘Tory Boy’ in the Harry Enfield sketches of a few years ago. Just maybe ‘Tory Boy’ could do better!!