Rishi Sunak has been warned not to allow the Tory right to use the cost-of-living crisis as cover for rolling back the UK’s climate change ambitions.
The Chancellor is coming under intense pressure from Conservative MPs to scrap or suspend green levies on energy bills to cushion the impact on customers of price rises expected to reach £600-£700 per household this spring.
But the Tory MP who signed zero-carbon targets into law as energy minister, Chris Skidmore, warned that abandoning the levies would be “disastrous for the transition away from fossil fuels”.
And environmental groups told The Independent that protection for disadvantaged groups must not come at the cost of measures designed to help wean the UK off greenhouse gas-emitting energy sources.
Green energy boss Dale Vince, of renewable power company Ecotricity, said the levies should be replaced by a windfall tax on North Sea gas producers, who he said had benefited from “excess profits” totalling £20bn as wholesale prices soared this winter.
Labour’s climate change spokesperson Ed Miliband told The Independent: “The cause of energy prices soaring is not our country’s environmental commitments, but a deeply incompetent government with a failed energy policy.
“We need action now to help families horrified at the prospect of rocketing bills. And the best way of keeping bills down in the long term is to move further and faster to reliable, zero-carbon power, and a national mission to improve energy efficiency.”
And Greenpeace UK’s policy director, Dr Doug Parr, warned: “If the UK government caves in to calls for green levies to be suspended or scrapped altogether, it would, at a stroke, undermine its long-standing promises and deal a blow both to its credibility with private investors and to UK climate leadership at the same time.”
Instead, the government should “double-down on renewables, warmer homes, and upgrading our energy systems” as the best route to affordable and reliable energy. he said.
Global warming sceptics in the Net Zero Scrutiny group of Tory backbenchers have been pressing hard for the removal of levies which make up around 12 per cent (or £195 a year) of the average home’s combined gas and electricity bill. The cash funds a variety of initiatives to boost renewable alternatives and improve energy efficiency.
They warn that increases to the £140 Warm Home Discount being considered by Mr Sunak to help the poorest households do not go far enough to save millions from a painful cost-of-living crunch at the same time as a 1.25 per cent hike in National Insurance contributions.
Treasury sources confirmed the Chancellor is working with regulators and suppliers to “explore potential mitigations” to protect consumers, but declined to say which option he favours.
Asked if Boris Johnson would rule out suspending or scrapping green levies, a Downing Street spokesperson said: “Our exposure to volatile global gas prices underscores the importance of our plan to build homegrown renewable energy to further reduce our reliance on fossil fuels. It remains our position that we think it’s right that we continue to invest in this, which ultimately brings down the cost of renewable energy sources while supporting the lowest income families and the most vulnerable in our society.”
Net Zero Scrutiny chair Craig Mackinlay told The Independent: “A lot of people will get pushed into fuel poverty unless the government acts. People are looking at that choice between heating or eating.”
And senior backbencher Robert Halfon said: “I’m not a climate Luddite. But we are also in extraordinary circumstances. There are other ways to support renewable energy. The government knows it has to do something. They can’t stand by and let people struggle.”
But Mr Skidmore warned cutting the levies would hit jobs in Red Wall seats supported by green subsidies and breach contractual obligations.
“The likelihood of this being abandoned or scrapped would not only be disastrous for the government’s transition away from fossil fuels, it would also be illegal,” he told BBC Radio 4’s Today programme.
Green MP Caroline Lucas said that the Tory MPs’ attack on environmental levies was “simply a cover for their real agenda – opposition to any government policies in support of the transition to net zero”.
Ms Lucas said that the current crisis was a consequence of “years of mismanagement and short-sightedness by Tory-led governments” which had failed to move faster on decarbonisation since David Cameron famously said he wanted to “get rid of all the green crap” from energy bills in 2013.
She backed a windfall tax on North Sea operators to fund a massive programme of home insulation to cut energy bills, and said she would support a shift in green levies in the longer term away from electricity – more than a quarter of which comes from renewable sources – and onto general taxation. Dr Parr too said that a move to general taxation would ease the burden on families struggling with bills this winter.
Jamie Peters, campaigns director at Friends of the Earth, told The Independent: “The UK government is still offering tax breaks to climate-wrecking fossil fuel companies. Any green levies on energy bills must go hand-in-hand with proper taxes on fossil fuel companies, and the UK government must make sure that these giant multinational companies who can afford to pay their taxes, do.
“We must keep moving on climate action, but equally the path to net-zero must not leave anyone behind.”
Mr Vince said that the energy sector was unique in having taxes imposed directly on it to fund government social and environmental programmes, at a cost of £6bn a year to consumers on top of the £3bn they pay in VAT on heating.
“We don’t have a price cap in food, we don’t put VAT on food and we don’t add the cost of farming support to food bills – but food poverty is a far bigger issue in our country, affecting millions more people than energy poverty,” he said.
“Government needs to take a consistent approach and if they truly care about energy bills being too high, then remove government tax at least. End energy bill hypocrisy – talking of their concern for the affordability of energy while at the same time making it less affordable.”
He called for a windfall tax on excess North Sea profits, which he said were “unexpected and unneeded” by producers this winter.
“It makes sense to move this money around, rather than burden energy users with a massive price hike, while North Sea operators make a killing,” he said.
Barnaby Wharton of trade body RenewableUK said: “Wind and solar are the UK’s cheapest sources of new power bar none, so they offer the best value for money for consumers who are being hit hard by rocketing international gas prices.
“Getting more renewables onto the system, including green hydrogen and more energy storage, will protect consumers against the eye-watering fossil fuel price shocks which are currently pushing bills up.
“Any calls to stop investing in our green future are short-sighted and misguided, as the UK has everything to gain by accelerating the transition to renewables”.