In an attempt to respond to mounting pressure over energy costs in the face of 10 per cent price hikes, the pair write today that in this week’s Autumn Statement they will remove a host of green levies and anti-poverty measures from fuel bills. Instead the cost will be paid for through general taxation, meaning the “big six” energy firms can reduce the sums they charge customers.
The pledge comes after Ed Miliband and former Prime Minister Sir John Major demanded action from the government, with Labour having pledged a energy price freeze in 2015.
The proposal by the Conservative-Lib Dem coalition is similar to an SNP pledge, made last month, when it also said the cost of the levies should be taken off bills.
Cameron and Clegg say the cost can be met through increased revenues the government has received from a crackdown on tax avoidance.
Writing in a newspaper today, they say they do not agree that green and anti-poverty measures should be dumped.
“We are going to stick to these commitments – but we are not going to ask you to pay for all of them through your bills. The two million poorest families who currently receive a discount on gas and electricity will continue to do so, but government will pay for it. We’re able to afford this because we have cracked down on tax avoidance – leaving us more money to help struggling families,” they write.
“We’re also changing the way we fund improving energy efficiency in Britain’s homes. We’ll all be better off when our homes lose less heat, so we want the energy companies to help insulate as many homes as possible over the next decade. But – apart from in the worst off homes – we’re going to spread the costs of these programmes over a longer time frame, reducing people’s bill.”
The details will be laid out in George Osborne’s Autumn Statement this week. Coalition ministers will be hoping that the measures can take the sting out of the increase in bills expected to land on doormats this year. Firms such as SSE, Npower, Centrica and Scottish Power have unveiled plans to increase bills by between 8 per cent and 10 per cent on gas and electricity, adding an extra £130 to the average “dual fuel” bill of about £1,500 a year.
Cameron and Clegg claim today that Labour’s price freeze would not work in practice. “Labour have promised a temporary price freeze on energy bills. But they’re taking people for fools. Energy companies would hike up prices both before and after the freeze – so families would end up paying more. The Coalition has come up with a serious and credible plan that actually works. By taking the time to get this right we’ve got the best outcome all round.”
Labour said the decision to reform the energy efficiency programme was overdue.
Jonathan Reynolds MP, the shadow energy and climate change minister, said: “The Energy Company Obligation is David Cameron’s scheme. He only introduced it this year and a few months ago he was even boasting that it was bigger than previous energy efficiency schemes. Labour has consistently said that ECO should be reformed to make it better value for money and targeted at those in fuel poverty. But what the public really needs is a Labour government implementing a price freeze until 2017 and resetting the energy market so that it works for the long term.”
The pressing political need to act on energy prices comes with Miliband having seized the initiative since September after announcing his demand for a price freeze – which was soon followed by the announcements of price increases by energy firms.
Speculation at Westminster is high that Osborne could announce a cut in fuel duty. The Chancellor is said to be keen to provide tangible “rewards” to households, following more encouraging economic figures in recent months which suggest that growth is now returning to the economy.
Meanwhile, Clegg has been lobbying for an increase in the tax-free personal allowance, with the Lib Dems calling for the floor to rise to £12,500 – meaning anyone on the minimum wage would pay no income tax at all.