The large businesses in the UK have urged the government to remove taxes on electricity bills for business to make Britain more competitive and energy costs more affordable amid escalating energy prices that hurt both consumers and industry.
In one of his first moves as the UK’s Prime Minister, Andy Burnham in July announced that the new Labour government would scrap the 5% value added tax (VAT) on household electricity bills to help Britons cope with rising energy costs.
All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs.
The cost of the removal of the VAT on electricity bills is being funded from the cancellation of the $2.4 billion (£1.8 billion) Digital ID program, the government said.
The government will introduce a tax cut to remove VAT from domestic electricity bills from October 1 in time to impact the next Ofgem price cap on energy bills for households.
UK energy bills are set for a three-year high at the beginning of the winter, as higher gas prices due to the Iran war have prompted Ofgem, the energy regulator, to raise the energy price cap on household costs by 4% for October through December.
The removal of the VAT would ease some of the pressure on UK households.
Now the UK business also wants the tax removed to save Britain’s industry, which is reeling from high energy costs this year as oil, gas, and electricity prices surged again in the wake of the Iran war.
“Moving electricity levies from both business and household bills to government spending would immediately make energy costs more affordable and competitive,” British industry groups wrote in a letter to UK Chancellor John Healey shared with Bloomberg News.
“It would also address distortions that undermine investment in electrification,” the UK business groups added.
By Michael Kern for Oilprice.com
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