The Energy and Utilities Alliance (EUA) has implored the government to temporarily remove VAT on energy to provide relief to consumers facing soaring bills.
The trade association for manufacturers of heating equipment acknowledged that it is not a “perfect solution” but said it is only way to head off a “catastrophe” this winter.
“When global shocks hit home, it is the duty of a government to mitigate the impact,” said EUA chief executive Mike Foster. “Energy bills have leapt £150 already this year for those on the price cap to £1277 and all the experts agree, they will jump again next Spring.
“When the regulator does not dismiss speculation of an average household energy bill of £2000, it is time for the government to act.”
Foster continued: “Scrapping VAT on energy, as a temporary measure, will immediately reduce the bills of hard-pressed households. For those on the price cap, it will save them £64 a year at the current level. If bills do rise to £2000, that VAT scrap will be worth £100.
“All households will get some relief this way. It isn’t a perfect solution but a good one.”
“This move will also allow the Prime Minister to make good his promise made during the Brexit referendum, when he and Michael Gove promised to scrap VAT on energy to give household cheaper energy bills as part of the Brexit dividend.”
He said polling by the EUA had found 76% of the public would support a temporary reduction in VAT, with only 11% opposing the measure.
“Consumers are genuinely worried about paying so much more to keep warm,” he added. “The choice of ‘heating or eating’ is one that no one should have to make.”
Cornwall Insight recently forecast that rising wholesale gas and electricity prices would force Ofgem to increase its price cap on energy bills to £1,659 in April next year, and then £1,663 the following October as the impact supplier failures rippled through the industry.
Other proposals to provide relief to customers include temporarily removing policy levies from energy bills and direct payments to households.