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Rishi Sunak and Jeremy Hunt are facing a backlash from charities and energy firms over the “stealth” return of the £170 green levies on consumer bills.
Charities, energy suppliers and senior MPs are warning that the reimposition of the levies on consumers, from this weekend, means a return to a “regressive” system that would hit struggling families amid the cost of living crisis.
The interventions come after The Telegraph revealed last week that the two-year suspension of green levies announced last autumn was to end from this weekend, after just nine months.
The cost of the levies was shifted from consumer bills to be funded instead by the Government, following a year-long campaign by energy firms and MPs amid spiraling gas, electricity and food prices last year.
It was again imposed on consumers with effect from Saturday, with no official acknowledgement of the move until The Telegraph’s article was published last weekend.
The Government insisted that the move was simply because Treasury funding of the levies had been linked to the energy bail-out, the Energy Price Guarantee, which ends for most bill-payers this month. No 10 said the levies, which fund schemes from home insulation to contracts with wind farm developers, would bring down future energy costs.
But Simon Francis, coordinator of the End Fuel Poverty Coalition, whose members include AgeUK and the Energy Saving Trust, said: “We would prefer the vital funding needed for long-term energy efficiency and fuel poverty prevention programmes to be funded through general taxation. The Government could have used the time that the Energy Price Guarantee was in place to work out a way of doing this fairly rather than through energy bills.
“If the Government did move funding off bills and onto general taxation, that would result in a further welcome reduction in bills this winter.”
Energy UK, which represents suppliers, said the Government had previously indicated that it would review “how policy costs on energy bills will be funded in future” and called for that work to now take place urgently.
A spokesman for the trade body said: “Energy UK encourages Government to press ahead urgently with this review, to remove existing distortions in energy prices and ensure funding is as progressive as possible, while maintaining the vital role of these policies in supporting households and reducing emissions.”
An industry source added: “Paying for things on a unit basis through energy bills is more regressive than paying for things through general taxation.”
Dame Andrea Leadsom, the former business and energy secretary, also criticised the move, saying: “I’m concerned that green levies on energy bills are a regressive form of taxation, impacting on the poorest hardest. During this cost of living crisis, it would be far better to keep them under general taxation.”
In the longer term, Dame Andrea said, “we need to take a long, hard look at how the subsidies for renewables are operating. Paying offshore wind farms billions to stop generating when it’s too windy, and letting others avoid paying back into the subsidy scheme when prices were at the peak, looks like bill payers are being taken for a ride.”
Sir Jacob Rees-Mogg has criticised the Government for shifting the cost of green levies back onto consumers “by stealth.”
Ben Lake, the Plaid Cymru MP who chairs the all-party parliamentary group on fuel poverty, added: “Funding polices out of taxation is typically fairer as, unlike a flat rate, our taxes take account of incomes.”
A Government spokesman said: “Thanks to falling wholesale prices and Ofgem’s new price cap – energy bills come down by around £430 on average and customers will not be affected by a price increase from green levies.
“Levies more than pay for themselves by driving investment in renewables and other generation technology and have saved consumers money on their energy bills overall over the past 10 years.
“We’re working with consumer groups and industry to assess the best long-term approach to helping vulnerable households, as part of wider market reforms.”