Hidden tax on energy bills set to double over next decade
Filed under: House and Home, Families, Budgeting & Planning
Many people don't know that they are paying £84 a year in 'hidden taxes' on their energy bills to help meet the cost of combating climate change. Mounting pressure could see these taxes more than double to £176 a year within the next decade, warns uSwitch.com, the price comparison and switching service.
Households currently spend an average of £1,194 a year on energy, with £84 or 7% of this going towards environmental levies. These include the EU Emissions Trading Scheme (£24), Carbon Emissions reduction Target (£45), Community Energy Saving Programme (£3) and the Renewables Obligation (£12).
Policies launched under the previous government are expected to add a further 6% in levies over the next ten years. This will cost consumers an extra £72 a year on their energy bills, resulting in the average household paying a whopping £156 a year in environmental taxes.
It doesn't end there though. The Treasury is already said to be considering an additional levy on electricity bills that could add a further £10-£20 to bills. If this happens, we could see the 'hidden tax' on our energy bills more than double to £176, accounting for 15% of the average household bill.
But this could actually be the thin end of a wedge. Ernst & Young calculates that investment in Britain's energy supplies will cost over £230 billion, potentially adding £548 onto household energy bills over the next 15 years.
While much of this cost can be expected to be recouped through higher energy prices, it could also have an impact on the amount being paid in levies. In fact, some of the levies already being charged on household energy bills are going towards meeting this investment cost.
Understandably, consumers are concerned. According to uSwitch.com research, 44% of people say that the commitment to cutting carbon emissions and moving to greener energy sources has to be balanced with the impact on people's bills, while almost a quarter (22%) say that affordable energy has to be the priority.
Three in ten say that the cost should be shared across government, industry, consumers and businesses. A further 14% say that it should be applied as a proportionate charge on energy bills, so that high users pay more, while those who consume less pay less.
That is the problem - while many people probably recognise that something needs to be done to combat climate change, you should be rewarded for cutting your energy use - not penalised. If suppliers charge environmental levies as a flat fee, people consuming less energy will find themselves paying proportionately more. So where is the incentive to save energy?
Ann Robinson, Director of Consumer Policy at uSwitch.com, called for greater clarity over what the 'hidden taxes' are for, a cap on how much consumers will end up paying and transparency over how the levies are being applied.
"If the levies are applied proportionately they will act as an incentive for households to cut their energy consumption," she said. "If not, then the industry will be sending out a very mixed message to consumers. Unfortunately, there is already a precedent here with low energy users generally receiving a smaller percentage price cut than high users earlier this year. Safeguards will also need to be put in place so that people who consume high amounts of energy for health reasons are helped rather than penalised.
She warned: "The important thing though is for consumers to grasp the longer-term implications of these levies - the only way household energy bills are going is up. It is crucial that we now all take steps to become more energy efficient and to ensure that we are paying the lowest possible price for our energy. This will help to mitigate the impact on our bills. I would also urge consumers to speak to their supplier to find out what support they can offer - part of the tax on our bills goes towards funding suppliers' energy efficiency programmes and they may qualify for help."
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Reader Comments (Page 1 of 1)
6-30-2010 @ 10:27AM
brian said...
Another stealth tax from Europe. It's about time we told them where to go. We haven't fought and won 2 Wars to be ruled by these idiots.
I don't believe in Global Warmimg or Climate Change whatever they call it. It just an excuse to screw more money out of us.
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6-30-2010 @ 8:09PM
REDNEX said...
And, of course, evetually turn us into indebted slaves to the superstate as the elite and their own live a life of wealth and leisure.
We need out of Europe pronto.
6-30-2010 @ 10:38AM
Chris said...
I had no idea this was happening but it scares me rigid to think this is going to double.
Can you tell me how us OAPs who have a total income of £100 per week are going to pay that?
All my pension money is taken up with standing orders/direct debits for lighting, heating, water, insurances and the like.
No luxuries here and no savings left either!
Please give us Pensioners a break.
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6-30-2010 @ 11:30AM
jess said...
I`m on the pension, it`s just away of killing us old uns off, with natural cold ,
well may be this year will be the end for me ,and I`m only sixty seven and enjoying life .They say freezing to death you just go to sleep. so i`t won`t be all that bad ,good night all
Jess
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6-30-2010 @ 1:56PM
ZOZO said...
Come on pensioners, stop whinging !! It drives me crazy when they come out and say 'poor me ' they get £250 towards energy bills that the average gamily with kids don't get so are much better off, and pensioners can still work part-time if they want to, so stop whinging - and yes, I AM retired and on a state pension
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6-30-2010 @ 4:51PM
mazaluk said...
I am about to become a pensioner, although as I will have a very good company pension I will be better off than most.
However,I believe that it is outrageous that the so called European Union can dictate how much tax to put on British fuel bills. It is a crime against all the citizens of this country, pensioners or not and the sooner we leave this blasted organisation for sucking us dry the better.
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7-02-2010 @ 2:02AM
Aljapajo said...
Climate change is the excuse for near bankrupt countries to manufacture jobs. You will see in the future these new companies slowly going bankrupt themselves as the demand for this technology wanes, as it becomes apparent that human activity does not effect nature's weather cycles. What makes it worse is that we are paying taxes (illustrated above) to set up these companies and they will reap the short term profits. Great if you can get on the gravy train. I give them 10 years.
Come on governments be honest with us (another forlorn hope)
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