The Great Energy Swindle

You are being ripped off with your energy bills, but by Government, not the energy companies. (Though the later aren’t exactly playing nice either!)

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The Government takes more in tax from your energy bills than the energy companies take in profit. On average 3.6% of your gas and electricity bill will go in profit to the Big 6 energy companies, while 11% for gas and 16% for electricity will go to the Government in taxation. This means energy taxes cost the average family (or student house..) around £200 a year.

A proportion of these (~9%) are the so called ‘Green Taxes’ which of course are not green at all. They do almost nothing to help the environment –  reduction in energy consumption caused by people no longer being able to afford to heat their homes is something I think we can all agree that is not a price worth paying. Of course some will say “oh, but the money is used to fund green jobs and investment etc”. Not really. Just like other taxation most is just swallowed up into the colossal black hole that is Government finances, and when funds are used to subsidise cavity wall insulation or whatnot remember that it was the poor bugger struggling to pay his bills who was forced to pay for it! We are not going to counter climate change off the backs of the poorest.

It’s not just your household energy bills either. When you fill up your car at the petrol station, how much of the final amount you pay do you think is tax? 10%? 20? 30? Nope. It’s a whopping 60%. That means when you fill your car up with £30, only £12 of that is actually going towards the fuel, the rest goes straight to the taxman. It’s a scandal, but one we seem to be overlooking.

And this is all set to get worse, as environmental lobbyists and EU regulation mean green taxes are set to soar in the future.

Yesterday, Labour Lords were only narrowly defeated on the 2030 decarbonisation target plans to add ANOTHER £125 in taxes to your bills.

Thankfully there is a welcoming sign emerging from the depths of Westminster – David Cameron has hinted that he intends to reduce energy taxes in response to Ed Milliband’s promise to freeze bills. Cameron should go the whole way and zero rate all energy from taxes.

So as we all jump on the Big 6 bashing band wagon, lets just remember who really drives up our bills.

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4 thoughts on “The Great Energy Swindle

  1. You’ve deliberately combined the VAT with the ECO and other fees (‘green levies’) so you can go “OMG ALL THE MONEY GOES INTO A BLACK HOLE”, and simultaneously go “OMG THE GREEN LEVIES ARE SO HIGH” while making the amount look higher in general. Nicely done, The Daily Mail would be so proud.

    You then conclude by asserting that the government is the one driving up bills, except, er, you’ve provided no evidence of them increasing any of the levies or taxes involved, while it’s plain to see that the big six have been raising their retail prices significantly.

    So let’s get into the details:

    Firstly, of the 11% and 16% you cite (without actual citations btw), 5% is VAT, and yup, that does go to general government finances, just like the VAT on everything else. If you want to argue for eliminating the VAT on it, fine, but if you’re going to do it from a party position of considering the deficit THE SCARIEST THING EVAR, you should probably explain what you’d make it revenue neutral with, or what you’re actually proposing will increase the deficit.

    The actual cost of the non-VAT government levies is about 9% for of the average household bill, and isn’t something that’s been shooting up.

    Secondly, stating that “the only reduction in energy consumption they cause, if any, is when people can no longer afford to heat their homes” is plainly laughable when you actually look at what the vast majority of the levies actually consist of (even aside from the complete lack of evidence cited). Based on the average bill of £1,267 a year, the levies amount to around £112, of which:

    £47 funds the Energy Company Obligation, which delivers energy-saving measures to low-income homes. These things do, quite obviously, save money (18W CFLs are obviously rather a bit cheaper to run than 100W incandescents).

    £30 funds Renewables Obligation, which helps underpin the development of, shockingly enough, renewable energy. While the economics of renewables have been improving markedly, the RO is pretty vital to ensure sustained investment and a cleaner energy mix as a whole.

    £11 funds The Warm Home discount scheme for pensioners. You’re right about this one, it doesn’t do much for the environment, other than ensuring that less older people die because they can’t afford to heat their homes. I mean, you can argue that old people dying sooner is good for the environment if you want, but I’m not going to help you.

    £8 goes to the ETS to, as I understand it, fund the cost of the GHG emissions under the EU ETS.

    £7 goes to fund feed-in tariffs which help to decentralise the energy system, reduce emissions, and create jobs in the renewable sector by eliminating uncertainty about payback times.

    £5 helps set a price floor for GHG emissions.

    Finally, £3 helps fund the roll out of smart metering, which not only helps people understand and reduce their energy usage far more effectively, but also eliminates the need for manual meter readings and estimated bills, which saves people money.

  2. Very tenuous points Julian, scraping the barrel somewhat.

    I did indeed combine VAT and Green Taxes – because I feel taxes in GENERAL on energy are too high, not just the ‘green’ ones. I do believe energy bills should be zero rated from tax – all tax- as I said in the final statement.

    The 9% on green taxes is obscene, I find it amazing you can say that number and not be dumbstruck . Of course no advocate of such taxes would ever try and explain them to someone on the doorstep struggling to pay their bills. They have stealthily been hidden away, and until recently avoid public scrutiny. The TPA did on the spot polling at petrol stations on how many could correctly guess the % of filling up your car goes to the taxman – unsurprisingly the answer was almost noone.

    As for rising taxes on energy – the vote yesterday was on the 2030 decarbonisation target, which would effectively have added £125 a year in green taxes to the average family energy bill. Labour fully supported it (ironic considering their hot air on energy recently…) but thankfully it was defeated 216 to 202.

    Providing funding for alternative investment in greens/renewable should come from other sources, not slapped onto the bills of the poorest already struggling to make ends meet. Ironically I would have thought you would be in favour of more progressive taxation in this regard!

    (that being said I’ve edited some of the wording for…clarity)

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  4. You still haven’t provided any evidence for your main claim, that its taxes/levies that are pushing up bills, not energy companies. A vote on a 2030 target that might, in time, slightly nudge up the proportion of the average bill that the levies make up, cannot explain that bills have been going up even though the wholesale cost of energy (as an executive from Ovo pointed out yesterday) hasn’t been going up.

    Even if you do think energy bills should be zero rated when it comes to tax, you didn’t explain why something with clear social costs should be exempt from VAT the same way that children’s clothing is, how you’d achieve the outcomes the levies do in another way, nor how you’d do it without increasing the deficit.

    In terms of the 9% being “obscene” and something nobody would dare to publicly support, I’d be more than happy to explain to someone struggling to pay their bills that the largest single part of this 9% funds the ECO, and how they can access it to reduce said bills (and emissions at the same time).

    In terms of the 2030 target, if you want to propose a better/cheaper way of us decarbonising our energy supply in order for us to not massively destabilise the climate and then have to pay huge literal and metaphorical costs to attempt to mitigate the damage, go ahead.

    Again, if you support funding to support renewable energy but in another way, please tell us how, and obviously how you’ll pay for it.

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