More than 120 UK businesses, charities and trade bodies have urged the chancellor to remove energy levies they call ‘hidden taxes’, saying the move could cut the average household bill by up to £250 a year and lower business electricity costs by about 20%.
Who signed the letter and what they ask
The open letter, addressed to the chancellor ahead of the 28 October budget, is signed by a cross‑sector coalition that includes Energy UK, the CBI, End Fuel Poverty and Age UK. The signatories argue that levies amounting to roughly 10% of energy bills should be paid for directly by the government rather than passed on to consumers.
“More than 120 organisations including big businesses and charities have called for the removal of ‘hidden taxes’ added to energy bills to help reduce costs for consumers and prevent businesses closing.” – The Guardian
The numbers behind the claim
The letter cites two headline figures: a potential saving of £250 per year for the average household and a relative reduction of 20% in business electricity costs. Both figures are presented as the maximum impact if the levies – currently estimated at about 10% of total energy bills – were stripped out.
| Metric | Figure | Period / Basis | Source |
|---|---|---|---|
| Potential household bill saving | £250 | per year | The Guardian – UK chancellor urged to remove ‘hidden taxes’ from energy bills |
| Potential business electricity cost reduction | 20 % | relative reduction | The Guardian – UK chancellor urged to remove ‘hidden taxes’ from energy bills |
| Levies’ share of energy bills | 10 % | share of total bill | The Guardian – UK chancellor urged to remove ‘hidden taxes’ from energy bills |
| Forecast average annual household bill (post‑cap) | £1,872 | annual, forecast by Cornwall Insight | Cornwall Insight forecast (cited in packet) |
Putting the £250 saving in perspective, Cornwall Insight expects the average annual household energy bill to be £1,872 after the next Ofgem price‑cap adjustment in January. A £250 reduction would represent roughly 13% of that forecast bill.
Context: current energy costs and upcoming policy moves
Energy bills are already high. The UK regulator Ofgem is expected to raise the price‑cap again in January, which would push the average annual bill higher than the £1,872 forecast. In July, Greater Manchester’s mayor, Andy Burnham, announced a temporary cut to VAT on domestic energy, delivering an average saving of £45 per household until April.
“Octopus said bills were on track to increase by 20% over the next four years, even if wholesale prices were to drop, because of the increasing amount levied due to the rising cost of government policies.” – Octopus (company statement)
The chancellor’s upcoming budget will be the first since the pre‑election promise in 2024 to cut energy bills by £300 a year by 2030. The letter’s timing suggests the signatories want the levy issue on the agenda before any new fiscal measures are announced.
What the claim means for households and businesses
If the levies were removed, a household currently paying £1,872 annually could see its bill fall to about £1,622 – a £250 drop. For a small business with an electricity spend of £10,000 a year, a 20% cut would save £2,000.
These savings are presented as “up to” figures, meaning the actual impact would vary with the size of a household’s consumption and the specific levy components that are removed. The letter does not break down which levies – for example, the Climate Change Levy or the Renewable Obligation – would be eliminated.
What remains unknown
The coalition’s letter does not provide an independent calculation of how the £250 figure was derived, nor does it detail the distribution of the 10% levy across different fuel types. No government response has been recorded in the packet, so it is unclear how the chancellor will weigh the claim against the fiscal need to fund the programmes currently financed by the levies.
Analysts would also need to know whether removing the levies would shift costs onto other parts of the public budget, potentially affecting tax rates or public spending elsewhere. The packet contains no evidence on those downstream effects.
Looking ahead
The letter adds pressure on the chancellor as the budget deadline approaches and as Ofgem’s price‑cap review looms in January. If the government decides to act on the coalition’s request, the headline savings could become a concrete part of the budget narrative. If not, the claim will remain a policy proposal backed by a broad but unquantified coalition.
For now, the £250 household saving and the 20% business cost cut are the two concrete numbers that the signatories have put forward. Whether they translate into real‑world reductions will depend on the next round of policy decisions and on any detailed analysis of the levies’ composition.