/ Home & Energy

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?


“the recent energy price-hikes have resulted in an estimated £200m extra going in to the Treasury’s coffers through VAT receipts.”

Nail, head. Same with Train Operating Companies, Bus Companies, ie any privatised public service. We complain about them until we’re blue in the face but whilst they are making money for the government rather than supporting the people, it isn’t going to change.

The City has a far stronger hold over the government than everyone seems to think.

John Symons says:
11 November 2011

Not quite the same, Dean. Private “public” transport companies only make money for the government through Corporation Tax, not VAT.

John Symons says:
11 November 2011

The government should use the £200m to increase current funding of Warm Front and to extend it beyond 2012 or is it 2013 if there is any of this windfall VAT left. The scheme is clearly underfunded if it had to close early in 2010.

No, no and no again to the warmfront idea!

The energy companies and energy saving trust advocate changing a boiler, warmfront do not fit A rated boilers, they charge on average £2500 to fit a new boiler (Source: Energy saving trust, boiler scrappage scheme final report) way above the odds for the boilers the scheme fits.
The outlay for a replacement boiler, even if it achieves the maximum £225 energy bill saving per year, would never be recovered. (Energy saving trust figures: average boiler life is 12 years)
Include the energy companies maintainence monthly payments (British Gas currently start at £13 per month which doesn’t cover the first £50 of parts) and the boiler would be out of working order for more than 4 years before it paid for itself!

I asked British gas why my bills remained the same after fitting an A rated boiler to replace a G rated (30 year old) back boiler, their reply was staggering,

“A new boiler will not use any less gas than an old boiler!”
This was from a senior billing manager!

The warmfront scheme was designed to stimulate more work for the industry and associated industries, revealed by none other than Ed Miliband (then energy secretary) at its media launch.

If the £200 Million is to be reused to help fuel poverty, warmfront is not the way to go.

There are major problems with the warmfront scheme;

* It would not help those trapped in fuel poverty, who already have a working boiler.
British Gas informed me after replacing my boiler and seeing no drop in energy consumption, that a new boiler uses just as much gas as an old boiler.
I’ve asked the Energy saving trust and British Gas why they advocate replacement boilers in light of what British gas have informed me (which tallys with my energy payments) on many occasions, both have refused to answer.
* The warmfront grants were increased from £2700, as the “closed shop” of companies fitting under the scheme were often charging in excess of £500 to the customer and using up the full grant. Warmfront grants have wasted millions on more profits for the installation company Eaga (The founder member just happens to also sit on the board of the Energy saving trust)
* One company group, Eaga (now changing their name to Carillion?), did the majority of installations and now under the “new” company name, will do the majority of maintainence as well, covering the first two years. Local engineers didn’t get a look in on any of the work unless they were able to pay large fees to Eaga, and act as contractors for the company, which drove up job prices. It was common place for the £2700 grant to no longer be enough to pay for a new boiler replacement, when in fact, it should be more than enough to complete a replacement boiler, cavity wall insulation and loft insulation. Rather than look at why it was costing so much, the previous government increased the grant amount.
* The timescales are often horrendous. In one case where application was made and an inspection was promised within 3 months, it took almost 8 months for an appointment to be made, then after inspection, it took over a year for the installation company to actually do the job. The timeframes involved would not help people trapped in fuel poverty this winter, or in many cases, next winter either.

Insulation is one of the few energy saving methods that can be applied quickly and make a difference. Insulation doesn’t rely on percentages of probability from a public/industry funded body (EST) to make a case for it.
This I feel would be a much better use of the £200 Million, rather than have it disappear down the warmfront scheme blackhole.

A combination of a strong energy secretary, government family unit policies, a strong regulator (which needs to start listening and acting on behalf of consumers) are also urgently needed to help people trapped in fuel poverty. Sadly at the moment, there are no signs of any of them.

@Josh Green.
I’m not in the least bit surprised that there has been no reduction in Frugal Ways’ heating bills.

As I posted in some detail on a previous convo that dealt with Boiler replacements and energy saving, my neighbours had their 1978 Glow Worm Space Saver 45 (off the SEDBUCK scale) replaced with a new SEDBUCK A rated boiler (installed by British Gas), and saw their fuel bills more then double rather than decrease.

My 1979 Glow Worm 52B Super, apparently a G on the SEDBUCK scale, used less than £400 of gas in the 12 months to October 29th this year, and that includes the quarter from November 9th to Feb 9th over last Xmas when we all had the terrible winter to contend with. IN the same quarter last winter my neighbours used £600+ on gas, and they, unlike me, have sealed unit uPVC double glazing throughout and cavity wall insulation. (I only have Everest secondary double glazing and no CWI).

I know and fully accept hat you can’t make a direct neighbour-for-neighbour comparison because of there are dozens if not hundreds of variables to take into account, but surely common sense says that in two identically sized, neighbouring, semi-detached houses, one of which is better insulated and has a newer boiler, the heating bills should not be so dramatically different and especially not in favour of the property with the older boiler and lesser insulation? It seems potty to me anyway.

As I posted last spring, BBC Radio 4’s You and Yours had the government representative for energy and two top blokes in the boiler industry on one day last winter and under pressure and constant asking “Will people save money by replacing an old, working boiler?” they all three had to admit in the end that the answer was “NO”.
I refuse point blank to embark on another Which? bashing session, but this issue is another, like SmartMeters and CFL bulbs, where Which? keep on telling us that the modern items will save us money when there is a wealth of evidence and in this case an open admission, on national radio, from the industry that in fact money will not be saved.

@ Frugal Ways – you are not the only person to have had this response from the energy companies, nor from boiler makers. Additionally the EST have written to me telling me (as I’m sure you know from the countless times I’ve mentioned this before) that “All new washing machines will use MORE electricity than older ones”. Although I have not personally communicated with EST about boilers, the details they gave to me about why new washers use more electricity and about how they test and WHAT they test lead me to believe that it’s almost certain that all new boilers use more (or at best the same) gas as older ones and that the EST only test ones which the manufacturers ask them to, so there are likely to be many boilers that use **less** gas than the EST recommended ones, but they have never been put forward for testing.

I, unfortunately, have been on the receiving end of Warmfront. It does nothing to provide work for local businesses – contracts for installation go to those who will do the job the cheapest and wherever they’re based and it seems that’s their only criteria. Certainly, in my case, no consideration was given to Customer Service or distance they’d have to travel. My installer was based in Newcastle-on-Tyne…I live in Derby. I received a phonecall on the arranged day, to be told they would arrive a couple of hours late due to traffic holdups. Did this mean they would allocate two hours at the end of the day or schedule in the next day? No. This is because they are scheduled at a different place – they only take one day to install. I’ve been informed since by a local installer he would always do an instillation over two days, so as to do the job properly.
My installation was chaotic. They began drilling through plaster before any dust sheets went down. When I complained, he went out to the van to get some! They laid down incorrect sized pipes in the bathroom, they ignored the decision made by Warmfront’s inspector as to the route they would bring the pipes into the house. Also, because we had no gas before, they had to drill entry into the house to reach the meter – they drilled into the wrong place, and so had to drill a second hole. They left a great deal of mess. At the end, and because I was ill at the time, I felt intimidated when I signed a form rating the experience and their workmanship/tidiness etc. One of the men stood over me while I filled it in. Our local gasman said he was appalled at the shoddiness and the routing of the pipes – we were told we would see some of the pipework but he said a great deal of it could have easily been routed better.
This is not a complete list of bad practise but I think I’ve given enough to at least put a reader off having the firm we had: their name being Fenham’s.

Like Dave, I have an ancient boiler. Mine is a Glow-worm Spacesaver 50BF, dating from around 1981, which I inherited when I bought my house. Inefficient, undoubtedly, but simple and extremely reliable. It has cost me less than £10 in replacement parts in the last 29 years. e-on recently predicted I will use £508 worth of gas in the next 12 months.

There seems to be several design problems with modern boilers which makes them unreliable beasts. The problem with drain pipes freezing and solutions to this problem has been well documented. What annoys me is the frequent failure of circuit boards. Electronic circuitry should be extremely reliable, but this is achieved only if it is well designed and uses components well within their ratings. No, I will stick to my old boiler for the time being and hope that the manufacturers get their act together.

If you are not saving any gas with your new boiler it is possible that it is not maintaining condensing mode. This will lead to loss of latent heat out of the flue instead of transferring the heat into the central heating water. May I suggest that you contact the Institute of Domestic Heating and Environmental Engineers for their observations, tel 02380 66 89 00 website http://www.idhee.org.uk (mentioned in Which September 2010 page 34 in connection with boiler sizing) I have in mind that your boiler output may be too big for the property IDHEE have advised us to restrict the maximum water temperature of our Glow worm boiler to 70 degrees C to keep it in condensing mode.( We can also alter our the boiler output between 5 and 24 kwh but it is too early to tell whether this can save gas. Many boilers appear to have a fixed kwh output).

Thanks for the info Dave, will certainly look into it.

As an individual that is passionate about Fuel Poverty,and I will declare my hand here, I use to work for British Gas, http://uk.linkedin.com/in/csljohnkirby and my Twitter @CSLJohnKirby is used to support #TestitTuesday to get working Carbon Monoxide Alarms in every home, I do feel that Centrica PLC \ British Gas do great work to help people in need, remember that the “Free” insulation is free to you because Government Policy has built the price into all fuel bills, having the best A rated boiler in the world is great, but all the insulation has to be good too.

No energy utility wants to increase prices, and the Environment Secretary, saying customers must switch is not great advice either, If a customer switches in because their supplier increases their prices, the two months later their new supplier puts up the price and they switch back, it just adds costs, and don’t allow energy businesses to plan their needs.

I would like the Government to implement a law where the Energy Utilities on the 1st of November have to declare their effective Tariff from the 1st of March the following year, so the customer can compare like for like.

I’m not totally convinced by some of what john kirby says above, but I absolutely agree that switching suppliers is a losers’ game and I absolutely agree with and support John’s suggestion about declaring tariffs for the coming year.

I would like to see Which? take up that suggestion and campaign for its implementation. Any chance Which?

Hi Dave, thanks for your comment. I think I see what john kirby is suggesting, and it is a good idea to help people compare tariffs a bit more easily. However, what Which? is campaigning for at the moment is even more ambitious and should mean that people can compare tariffs at a glance no matter what time of year. We’re asking Ofgem to suggest a simple tariff system for *all* energy tariffs (not just standard tariffs) so that consumers are no longer confused by myriad confusing deals (which should also make switching much easier). You can see more on what we’re proposing here:


And if you want to help us, please do join in and email Ofgem – http://www.which.co.uk/tackletariffs – they should be releasing their consultation on these proposals very soon and we’re keen that they take the idea of a simple tariff on board.


“Switching” has a number of issues which also need addressing.

The big 6 energy companies are just not transparent at all – which can only be for a reason, because they do not want the public to see what their vastly inflated fuel bills are paying for.
* How much of the current rate of approx £60 commission per switch is burdened on the customer? The whole £60 on the customer switching or spread across all customers?
Some are of the opinion that switching commissions make up only a small percentage of bills, but no one knows how it is spread if it is spread at all and not added on to the quotes given to entice a switch.
There are good reasons why big price comparison websites are often limited companies to hide profits (not just made in the energy industry, but supermarkets, insurances, etc.) or refuse do disclose commission payments they receive under the guise of “financially sensitive information” – these serve little purpose to fight fuel poverty.
A line rental package and internet connection monthly fee is most commonly needed to view tariffs and switch, the majority of fuel poor I would wager, are not in a position to afford this set up.

It astounds me why pre payment customers are forced to pay more for their energy, when in effect, they always pay before they use it, paying the energy companies in advance, in effect an interest free loan.
Pre payment customers also pay higher standing charges, one example being of Eon, who increased standing charges at the same time as energy price increases, but little was mentioned of this in their communication to customers about it (which in itself is grounds for an OFGEM investigation as it represents a “significant change” to Eon customer’s contracts)

Trying to get information from the big 6 about how much transportation costs are in different areas is like trying to get blood from a stone, how units on a meter differ from kWhs and how they arrive at the amount charged is so misleading, that even senior billing staff don’t know how to calculate it, many are not even trained to find the formula to calculate it!
The CV number, that changes on all digital meters every week is part of the calculation, yet for anyone without a digital meter, it’s impossible to work out, as energy company staff are not given this information. How to find this value has been removed from meter instructions for digital customers, ie, the option number to display it.

Factor in the absolutely disgraceful way the big 6 are treating customers, who ring up with genuine complaints and questions, and the energy company staff simply refer them to “the energy saving team” who in turn refer them back to the correct billing department and then promise call backs with answers, (same procedures yet totally seperate companies “not” operating a monopoly?) yet don’t even bother to call back and ignore the customer as if they didn’t complain in the first place! (Ref: British gas and Eon)

I’m surprised that the energy secretary, OFGEM and the big 6, cannot be bothered to comment on which? threads on the subject. Their silence speaks volumes. They are simply not interested in customers at all.

Perhaps the energy secretary should be given the task of informing the relatives of those in fuel poverty that will sadly pass away this winter due to being afraid to turn on their heating or not eating properly?
I wonder if they would be interested in his policy to save £50 of a home’s energy bill in 2015 by way of an explanation?
It might make him wake up and appreciate what many people are going through, or would that be too easy?

Managing the basic human right of access to heat and warmth this coming winter is a balancing act. The future needs balanced with today’s problems, as it stands, the energy secretary, the regulator OFGEM and the big 6 energy companies are doing precious little to help anyone except their shareholders and bonus grabbers.
People don’t fall into fuel poverty by accident, they are placed in this group because of the actions of the big 6 and a lack of action by OFGEM and successive governments that are elected to work for each and everyone of us, but are failing miserably!

The most simple and correct action is to reduce VAT to zero on electricity and gas; both are essential supplies and were it not for the E U directives would be exempt.

I confess to ignorance here – I did not realise that the EU had any hand in the introduction of the 5% rate of VAT on fuel. Is this really correct?

I thought it had been the brainchild of one of Osborne’s predecessors in order to gain further income for the government coffers. Possibly I have been mis-judging successive Chancellors and Governments for retaining it.

Dave D.- It is correct, the EU ruled that they could not be exempt from VAT; I canot remember if the EU also said that they could not be zero rated. Another advantage of being in the EU ?

Advantage??? Yeah right.

I’m not normally a right-winger nor even right of centre but I see almost no use for our membership of the EU and this would appear to be another reason for that feeling.

Sybilmari says:
24 November 2011

We need a revolution in thinking in this country which puts people first instead of profit. We only have to look at the fuel companies’ profits for each year to see that the price of fuel is inflated unnecessarily. Everything in this country is too complicated now. The governments we have (all of the political spectrum) are hostage to large corporations/big business. They are also dependent on taxation for revenue. Governments who are interested only in balancing the books lose their principals. Things will not change while we, the residents, allow the kind of governments we have. Failing that a disaster will change everything for us. It would make economic and human sense to provide every building with either a means for producing it’s own fuel or a shared system between groups of residents. We have enough water, light and wind in UK to be energy self-sufficient. It just needs the will and the vision to do it.

Chris Read says:
24 November 2011

Have to laugh that everyone on here bashing efficient boilers get their fuel from… British Gas. You have to be completely stark raving BONKERS to deal with BG, they are always the most expensive and useless company that only survives because of their former monopoly.

I switched to an A rated boiler and it knocked about 20% off my bills, mind you I’m with Ebico (not one of the big 6) so I pay a lot less than people silly enough to stick with BG. In summer when I use almost no gas, my gas bill is zero as Ebico don’t have a standing charge (they are the only ones, and no stupid tariffs for confusing the thickos), this more than offsets the winter costs.

Michael Hahn says:
24 November 2011

I am really fed up with the approach to energy price hikes.
As is normal. the Government blame us by saying that we should change supplier more. I am at a loss to understand which of the six I could change to to save serious money? They are a price cartel.

The Government commend the self help of improving energy utilisation. Now Which? add their weight to this. BUT…I live in an old house with solid walls and attic rooms. I cannot see how to insulate better (in a remotely cost effective way) and boiler and window upgrades are totally cost ineffective.
I am stuck, and it is not my fault.

SilverJohn says:
24 November 2011

On a different subject, but still related to Energy, how about the Chancellor uses the £200m to redress the swingeing cuts he made to Solar PV generation schemes on 31st October. For a domestic customer, the Feed-in-Tarriff (FiT) was reduced from 43.3p per Kw to 21p per Kw with only a window of 6 weeks for customers to get systems installed before the rate changes (On Dec12th).
This cut of over 50% has caused uproar in the fledgling Solar Industry which prior to the announcement, employed some 30,000 people. Right now, there is a chronic shortage of panels, inverters and installation rails so even if most people wanted Solar PV before the 12th Dec deadline, they couldn’t buy it and get it installed. Post 12/12, there will be a glut of equipment and thousands more out of work because it will no longer be economically attractive to install Solar PV. The return on investment will go out from currently about 10 years to something approaching 20 years, a timescale which most people regard as too extended.
The Government claim to have “Green” policies and pretend to be encouraging small businesses but this drastic cut in FiT has shown that neither of these policies are being actively pursued.

As a pensioner I would like the annual fuel £200 to be targetted to those who really need it. My husband and I feel there are far more needy pensioners than we are. Couldn’t the government reallocate these funds in a different way?

Jeff Ford says:
24 November 2011

I agree with Silverjohn. How can this subsidy be cut at a time when it will threaten jobs and a fledgling industry that will create jobs for many ordinary tradesmen? Surely job creation is vital at this time? We can then work to get ourselves back on a more even keel but not when actions by this coalition force employers to lay off staff.
We need many positive actions to boost our economy and, examining at the performance of this present coalition, seems to indicate they are unable think of any that will set us on the right road. Yes, we all accept it will be a long and difficult recovery but constantly creating financial pressures upon the working population i.e. VAT, Fuel Price increases, means this section of the population is being punished more than others. Unemployment is rising, a youth population is being deprived of a job ethic, and we are wallowing in indecision.

It would be nice if a few MP’s were tecnically qualified and understood in some depth the problems they have to solve. We’re talking big scale not 1 or 2%. I’ve thought for years that the biggest waste of energy is the 2/3 (ish) which is sent up the stack for each 1/3 of useful electricity when generation is by steam. In days gone by waste heat was used to heat up districts around the power stations eg Battersea (London) and Kirkstall (Leeds). If money was spent researching the transmission and use of low-grade heat (usually steam or hot water) the results would be interesting (and probably very cost effective). Small generating stations where the heat could be used rather than huge ones throwing their waste heat into the river Trent would be economic if all their output was considered rather than just electricity. I think my thermodynamics is reasonably sound. Comments please.

Patrick says:
24 November 2011

My house is housing association owned and was built in the 1950,s and is partly prefabricated.
Therefore as i have been told by experts it is not possible to have cavity wall insulation so i cannot save money this way as is proposed.

Regarding the debate on v.a.t,my opinion, which counts for nothing is that fuel bills should be exempt from v,a,t.

I hope this does mean efficient alternative energy schemes and not pis in the sky like wind farms.

Sorry that was a typo. I meant ‘pie in the sky’. Or mybe my ‘subconscious’ was at work, in which case it should have been ‘p**s in the wind’, but I couldn’t be that rude about dogmatic tree-huggers. I love hugging trees. They smell great. Better than the wining grind of wind farm ‘trees’

Sheila says:
24 November 2011

Quite frankly I think George Osborne should abolish VAT on utility bills. People are really going cold, and even a member of my family called in today to say “I have come for a warm as I cannot afford the heating during the day at home” and then realised that we pensioners did not have our heating on anyway. It is shameful when so much money in wasted in othe areas. Still the more people are killed off this winter the better the government will like it.

Hi SilverJohn – we haven’t advocated putting the money back into solar FIT, but we have looked at that in another Convo here: https://conversation.which.co.uk/energy-home/feed-in-tariffs-cost-of-solar-panels/

Would be good to hear your thoughts. We’d be keen to see the government extend the deadline for reducing the rate, as so many people had potentially already signed up and could be out of pocket if they can’t get their panels installed on time.

Jack – we’re advising that this money should be put back into energy efficiency. Wind farms would count as generation so that’s a bit of a separate issue. One of the key things we can do to save people money on bills now is provide them with the means to make their home more energy efficient e.g. adding insulation so the heat doesn’t leak out through the walls.

Jaguar says:
24 November 2011

I want the £200,000,000 used to help reduce the annual deficit and thus the national debt. That will help ensure UK’s debt interest payments are minimised and the country’s financial stability enhanced to the benefit of us all.

Householders can make their own decisions about new boilers and loft insulation and calculate the payback period for themselves.

I agree with the comments of Silver John posted 24 November 2011 at 12:28 pm and Jeff Ford at 12.49 pm.

The government’s indecision seems extraordinary, unless I am mistaken in thinking that the change from 12th December is a PROPOSAL? Has it been made clear whether it will be so? The chaos ensuing from a proposal is indeed colossal. I presume that all the installers will have had to give their employees a month’s notice as there are unlikely to be further sales after the 12th, just before Christmas. I would like Which? to ask the government how and when they are going to make this PROPOSAL a DECISION one way or the other?

I would also like to know how the government intend to improve the situation of people who have to use prepayment meters in rented accommodation with single glazing and no cavity wall or roof insulation can be helped? Suggestions anyone?

I would like clear and accurate information.

Hi Beth, I can assure you that we are looking into this, specifically we’re urging the government to honour the previous rate for all of those who have signed contracts. However, I should stress that on the whole Which? does support a reduction in the rate of the feed-in tariff, as all consumers pay for it through their bills, and it doesn’t seem fair that a very few will benefit when so many are worried about the cost of their energy bills.

But as I say – the reduction is being implemented very quickly, and we think it is unfair on those who have signed expensive contracts based on the previous rates – who could possibly miss out on getting work done by the deadline. We published a Convo on this topic at the time they came out, and it would be great to hear any more solar thoughts there:


Whilst it is not immediately at the moment an energy will affect the country in the near future particular as The UK is now reliant on energy from overseas. The government should be using funds from excess VAT energy for savings for sources such as enery saving projects.