Background:
Energy has become particularly costly in 2022 for a variety of reasons. A cold European winter in 2021 used up stored gas supplies.[1] Increased demand for energy in Asia means that gas is scarcer in the UK. These dramatically changing conditions have made it difficult for smaller suppliers to maintain a viable business, and the Conservative government’s price cap means that they cannot survive by passing on increasing energy costs to consumers.[2]
Since August 2021, 26 energy suppliers in the UK have gone bust. This threatens to lead to regular government bailouts of the energy industry, which has already effectively occurred with the appointment of a special administration regime for Bulb Energy in November 2021.[3] This bailout will potentially cost taxpayers £1.7 billion.[4]
At the same time, there are a number of green taxes on households and businesses. Some are not intended to be environmental taxes – such as air passenger duty and VAT on energy bills – while others such as the climate change levy are.
Households also pay other green levies through their energy bills. While some of these are environmental and social obligations which are fixed in contracts that have already been signed, other environmental taxes are straight-forward taxes, which can be easily reduced or suspended by the government.[5]
READ THE BRIEFING NOTE
[1] Black, J. Energy prices: Why are power bills going up?, BBC News, 19 November 2021, www.bbc.co.uk/news/uk-northern-ireland-58558645, (accessed 6 January 2022).
[2] Politics.co.uk, Collapse of Bulb demonstrates failure of energy price cap, says IEA, 23 November 2021, www.politics.co.uk/news-in-brief/collapse-of-bulb-demonstrates-failure-of-energy-price-cap-says-iea/ (accessed 6 January 2022).
[3] Morison, R. and Gillespie, T., Energy Boss Casts Doubt Over U.K.’s Costly Bailout of Bulb, Bloomberg Green, 9 December 2021, www.bloomberg.com/news/articles/2021-12-09/energy-boss-casts-doubt-over-u-k-s-costly-bailout-of-bulb, (accessed 6 January 2022).
[4] Gosden, E. Taxpayer provides £1.7bn loan to support Bulb Energy through crisis, The Times, 25 November 2021.
[5] Clark, R., So what DOES the green tax on your energy bill actually pay for? The answer, as ROSS CLARK reveals, is a fiendishly complicated network of schemes that often backfire, Daily Mail, 4 January 2022.