Reeves‘s Planned Electricity VAT Cut Faces Criticism from Experts
London, UK – Shadow Chancellor rachel Reeves’s proposal to cut VAT on electricity bills by 5% is drawing criticism from energy and sustainability experts who argue the measure could be counterproductive and fail to address the underlying issues driving high energy costs. The plan, intended to alleviate pressure on household bills ahead of the next general election, is being weighed against other potential measures as Reeves navigates tough fiscal choices.
The proposed VAT cut is being considered alongside options such as funding renewable energy subsidies and the Great British Insulation scheme through broader income-based contributions rather than energy bills. Currently, schemes are funded based on bill size.
Experts suggest shifting levies from electricity to gas bills could incentivize homeowners to adopt climate-pleasant heat pumps over new gas boilers. Madeleine Gabriel, director of sustainability at Nesta, advocates for removing “almost all levies off electricity, and moving any that remain on to gas,” arguing it would ”even out the difference between electricity and gas bills.”
Nigel Topping, chair of the Climate Change Committee, echoed this sentiment, stating the government’s “number one piece of advice…for the last two years is you’ve got to do something to bring the cost of electricity down relative to gas.”
The debate over energy bill relief comes as Reeves faces pressure to possibly break a manifesto commitment to raise income tax due to a notable fiscal deficit. Another option under consideration is a direct rebate to households,similar to the £400 energy bill support provided by Rishi Sunak in 2022,though critics cite the cost and administrative complexity of such a scheme.
The proposed VAT cut also raises concerns about potentially aiding the Reform party, which has pledged to scrap green levies and abandon net zero targets.
