Cut The Cost
Britain’s electricity is too expensive. Extra charges on electricity bills, known as social and environmental levies, add around 18% to what households pay, exacerbating fuel poverty as well as holding back the transition to heat pumps.
The money raised by levies is important, as it funds investment in renewable energy and energy efficiency for low-income households. But these costs should be moved into general taxation, not loaded onto bills. Doing so could save households as much as £530 a year, would protect low-income households, and still support investment in renewables.
Britain has some of the highest electricity costs in Europe, and a record number of people are now struggling with energy debt.
A significant factor keeping prices high are the social and environmental levies placed directly on electricity bills. These levies are important for funding renewable energy infrastructure and helping homes on low incomes access affordable energy. But how they are collected is no longer fit for purpose, impacting the most vulnerable and disincentivising the switch to clean heat. Those reliant on electric heating are more likely to be in fuel poverty but pay a far higher proportion of their income on social and environmental levies than those on higher incomes.
The fairest option is for Government to move these important levies into general taxation. The Chancellor set a precedent for this in the 2025 Autumn Budget by announcing that the Renewables Obligation would be partially funded by the Treasury instead of via levies on bills, on a temporary basis. But further levies are due to be imposed on electricity, with the total share of bills made up by levies set to rise by a third by 2031. We need a permanent solution. Moving remaining levies off electricity bills could have significant benefits for millions of households across the UK, cutting costs by between £170–£530 a year.
Cutting the cost of electricity wouldn’t just help to tackle fuel poverty – it provides a significant financial incentive for households to transition away from fossil fuel heating and towards zero-carbon heating like heat pumps. This is essential for tackling climate change and meeting our net zero obligations.
Key stats
Households with a heat pump could save up to
Low income households could save as much as
The number of households would save at least £300 a year