The 3 ways government could reduce energy bills for UK households without
The government has been called on to implement new ways to reduce energy bills without cutting VAT.
Thinktank Green Alliance said removing renewable energy subsidies, reducing system costs and introducing efficiency standards for homeowners could cut a typical household’s annual fuel bill by as much as £178 by 2030.
Families living in drafty, inefficient rental properties could potentially save up to £587 a year further. Thanks to these measures.
The proposals come amid reports that the Treasury is considering scrapping VAT on energy and reducing efficiency schemes funded through household bills, as it looks to ease the cost of living crisis and address criticism of spending on net-zero policies.
The Green Alliance has stressed the urgent need for government intervention and said the average household is expected to pay £478 more in October 2025 than four years ago. It is estimated that around nine million households in the UK currently experience fuel poverty, demonstrating the critical urgency of the situation.
But the environmental organization said cutting VAT and energy efficiency programs would be the wrong way to go.
Stuart Dossett, senior policy advisor at the Green Alliance, said: “We are still living in a cost of living crisis, a fossil fuel-driven energy crisis.
“There are many households across the country that are affected by this and as we head into winter many people will not be able to heat their homes to a comfortable temperature because the bills are too high.”
While the government has “rightly” acknowledged the need to cut costs, Mr Dossett argued that cutting VAT rates to zero could reduce bills immediately but would be “more of a move forever” as reversing this would be politically difficult.
Using the £2.3bn VAT cut would cost the Treasury to collect some green taxes, which are diverted from bills to government spending and focus on subsidies for renewables that are more than a decade old, while still reducing consumer costs.
These would include feed-in tariffs for residential solar power and some “renewable energy obligation” subsidies for early clean electricity projects such as wind farms.
The Green Alliance argues the schemes will have advantages over zero-rate VAT as their costs will fall by the time they are finalized in 2037, making it a better value move for the government.
Because they are built into electricity bills, their removal would provide further savings to people who rely directly on electric heating (those on lower incomes and in fuel poverty due to high running costs), while also encouraging the uptake of heat pumps powered by clean electricity.
Mr Dossett also warned the government should not cut spending on energy efficiency measures, which cover the cost of insulation and other upgrades for households in fuel poverty through a tax on bills.
“If the government is serious about reducing people’s bills for good, the way to do it is to invest in the insulation of our homes, not to raid schemes that help families reduce their energy costs and ensure their totals are added to the Budget,” he said.
A new report published by the Green Alliance ahead of the Budget says system costs could be reduced by 2030 with a range of “no regrets” options, including reducing voltage levels on the low voltage grid as modern devices use more power than they need.
The Green Alliance also advocates placing gas power plants in “strategic reserve,” removing them from the electricity market and allowing system operator Neso to determine when to produce electricity from gas to prevent high gas prices from driving up the cost of energy.
Measures to reduce the cost of financing new renewable energy sources could reduce the cost of their production and the price of the electricity they produce, while also increasing their distribution and reducing the UK’s exposure to expensive fossil fuels.
The think tank is also calling on the government to introduce a private rental sector minimum energy efficiency standard equivalent to Energy Performance Standard (EPC) C by 2030 to help people in rented accommodation who are often most vulnerable to high bills.
Mr Dossett said the move was “vital to eliminate the large number of households currently experiencing fuel poverty”.
Other measures, including installing smart meters that can also help people reduce energy use and cut their bills.
Taken together, the Green Alliance said, a typical household could save up to £178 a year by 2030, and a family who upgrades rental housing from EPC E to C and gets a smart meter could save up to £587 in total.
A spokesperson for the Department for Energy Security and Net Zero (DESNZ) said the government did not comment on speculation about tax changes.
But they said: “The government’s clean energy mission is exactly how we will deliver cheaper energy and reduce bills altogether.
“Our mission is relentlessly focused on delivering lower bills to the British public to tackle the affordability crisis caused by our dependence on fossil fuel markets.”
The government will publish an update “in due course” on its plans to ensure private rented homes reach the EPC C standard by 2030, and is exploring options to rebalance gas and electricity prices, the spokesman said.
