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The Conservative Party has urged the government to abolish VAT on household energy bills for a period of three years to help alleviate the rising cost of living amidst ongoing tensions in the Middle East. Their proposal includes funding this initiative by eliminating various renewable energy programs and green levies currently in place. The government had already announced plans to remove certain levies from energy bills starting in April, a move expected to reduce costs, although energy prices are anticipated to increase again in July when the energy price cap is adjusted.
Concerns over energy expenses have intensified following recent developments in Iran, where the Strait of Hormuz, a critical global oil shipping route, has been effectively blocked, causing wholesale oil and gas prices to soar. In response, the Prime Minister is organizing a roundtable meeting involving leaders from major energy companies, shipping firms, financial institutions, and insurance sectors to discuss collaborative strategies aimed at mitigating the war’s impact on the cost of living. The government will also receive a military update concerning the security status of the Strait of Hormuz during this meeting.
The Conservatives emphasize that removing the current 5% VAT on energy bills would save the average household around £94 annually based on projected energy costs from July onward. They argue that the measure would provide financial relief immediately while efforts to increase domestic oil and gas production intensify. Their plan also includes scrapping multiple green energy initiatives, such as subsidies for heat pumps, and ending green levies like the Renewable Obligations Certificate and Carbon Tax, which currently fund renewable energy projects. Furthermore, the party points out that expanded North Sea drilling would increase tax revenue, potentially helping to further ease household financial burdens. Overall, they estimate that this energy package could reduce bills by £200 a year for an average household.
In contrast, Labour has banned new licenses for North Sea oil and gas extraction but maintains that fossil fuels will remain part of the energy mix in the near future. Labour’s Exchequer Secretary to the Treasury criticized the Conservative plan, particularly its emphasis on maximizing North Sea drilling, stating, “the central foundation of the Tory energy plan… won’t bring bills down.” He also condemned the Conservative leader’s proposal to repeal the windfall tax on oil and gas companies, which currently helps finance cost-of-living assistance, adding, “From trying to plunge our troops headfirst into war without a plan, to her complete mess of an energy policy, Badenoch is proving time and again that she’s completely out of her depth.” Meanwhile, Conservative leader Kemi Badenoch has condemned Labour’s approach, highlighting her party’s stance on scrapping what she calls “crazy green taxes” and advocating for increased North Sea production, claiming their “Cheap Power Plan would reduce bills by £200 for everyone.”
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