Rishi Sunak’s plan to cut VAT on energy bills and Liz Truss’ temporary moratorium on green levies clearly won’t be enough to touch the sides of the cost of energy bills this winter.
Both leadership candidates are right to look to tax cuts to ease the burden -it doesn’t make sense to tax energy use only to give everybody a handout. Nor should we keep green levies on skyrocketing bills when paying for them through the Treasury is a fairer way to fund insulation and renewables.
But neither solution alone is sufficient for the coming winter storm. Rishi’s plan will shave 5 per cent off energy bills, roughly £210 by January, and Liz’s green levies moratorium will cut bills by £153. These savings are dwarfed by wholesale gas prices that could add £2500 onto bills this winter.
Our reliance on fossil fuels is to blame for the energy crunch. Vladimir Putin has exploited Russia’s vast supplies and Europe’s dependency to inflict economic harm on allies of Ukraine.
We can already see the eye-watering rise in energy prices, the fears of shortages and the beginnings of a public backlash with people threatening not to pay their bills.
The next prime minister will need to put Britain’s energy policies on a war footing. Tax reductions alone won’t cut it. But combined with targeted financial support for vulnerable households and a national energy efficiency campaign, we can soften the blow.
Nearly 19 million homes are poorly insulated. The draughtiest home – often occupied by those least able to afford their bills – will pay around £1,000 more for gas than energy-efficient households this winter. But simple and quick-to-install measures like loft and cavity wall insulation can cut people’s bills by hundreds of pounds.
The next prime minister can tackle fuel poverty by insulating homes. Investing an extra £1bn a year in the successful Energy Company Obligation (ECO) would insulate half a million more homes this winter. And extending the scheme until 2030 could insulate over 7 million homes.
They should also expand the Boiler Upgrade Grant to install 775,000 heat pumps by 2025. This would cut bills by up to £225 and reduce their usage by 80 per cent while driving down the price of low carbon heating technologies.
Energy firms should be required to inform customers about energy efficiency measures. Simple steps like turning down the boiler’s so-called “flow temperature” can cut gas bills by 8 per cent without sacrificing comfort.
When the problem is rocketing wholesale gas prices, doubling down on net zero is the answer. Despite claims from a minority of sceptics, net zero isn’t at odds with conservatism; it’s a conservative mission we must continue.
Spending more on insulation and low-carbon technology now is also fiscally conservative. Expanding schemes to insulate fuel-poor homes will not only permanently reduce people’s bills but also save taxpayers’ money in the future. And offering more heat pump grants will nurture the industry, creating jobs and driving upfront costs down, so subsidies are no longer needed, as we saw with electric cars.
These three proposals could cost up to £9bn over the next eight years, significantly less than the £37bn the government is already spending to help households through the energy crisis. As energy prices will likely stay high for years yet, if we don’t invest now, we will spend billions more on treating the symptoms and not the problem.
These are industry-led and deliverable measures to reduce bills and conserve energy. On top of tax cuts and financial support, this is the Conservative winter plan Britain needs.
First published by City AM. Cameron Smith is CEN’s Head of Communications.