Families will pay £280 a year in ‘green taxes’ by 2020 to fund the shift to wind, solar and nuclear power, ministers admitted yesterday. The revelation threatens to spark a revolt from consumers, who are suffering the biggest and longest squeeze on living standards in more than 60 years. Chancellor George Osborne is under pressure to over-rule Mr Huhne and halt the rush to green energy in a bid to protect British industry.
The huge cost faced by ordinary people will pay for the Government’s pledge to cut carbon emissions and be ‘the greenest ever’.
Households currently pay £89 a year on their bills for the green energy drive, but this will increase every year to reach £280 by 2020, according to the Government’s Department for Energy and Climate Change (DECC).
The ‘taxes’ will provide almost £8billion a year towards the £200billion cost of vast wind farms, nuclear power stations, a new pylon network, and to put up solar panels.
But in a bizarre statement, energy and climate change secretary Chris Huhne told the House of Commons that his policies mean consumers will actually be better off.
He said: ‘By 2020, we expect household bills to be 7 per cent – or £94 – lower than they would otherwise be without our policies.
‘Britain’s homes will be cheaper to heat and light than if we did nothing.’
His claim is based on a controversial assumption that families will make vast reductions in their electricity and gas bills by 2020 – wiping out the £280 in green taxes. It also assumes there will be a large uptake of government-backed schemes for insulation projects.
The revelation threatens to spark a revolt from consumers, who are suffering the biggest and longest squeeze on living standards in more than 60 years. In addition, Chancellor George Osborne is under pressure to over-rule Mr Huhne and halt the rush to green energy in a bid to protect British industry.
The fear is that manufacturers and other businesses will be saddled with huge levies on energy bills, pushing up costs and threatening their ability to sell goods around the world.
The details were revealed in the small print in DECC documents.
The current average annual energy bill is around £1,200. DECC said the figure would be £1,379 by 2020 without any government measures to drive a switch to green and nuclear power.
It claimed the figure would be £1,285 based on the impact of its green taxes and associated policies to cut household energy use and curb wholesale prices.
However, a DECC source admitted this lower figure would be possible only if households slashed electricity use by a third (from 4.5 to 3 megawatt hours a year) and gas by 6 per cent.
The Government has a target of providing 20 per cent of the UK’s electricity from renewable sources by 2020. Despite the £280 price tag of government policies, Mr Huhne insisted rising fossil fuel prices rather than green taxes were to blame for higher energy bills.
He said: ‘I want to insulate Britain’s homes not just from the cold weather, but also from the chill winds of global fossil fuel prices. It’s these that are pushing up consumer energy prices.
‘We will secure our energy at the lowest cost: in the short term by promoting competition; in the medium term by insulating our homes and in the long term by steering us away from excessive reliance on fossil fuels and on to clean, green and secure energy.’
But Dr Benny Peiser, of the Global Warming Foundation, said Mr Huhne’s reassurances were ‘political spin’.
Political spin: Dr Benny Peiser said that the statement that bills will fall was based on guesswork rather than any sound economic facts
‘All analysis by City banks and others make clear that current government policy will lead to big increases in energy bills,’ he said.
‘The energy-use reductions being assumed by the Government to justify the claim that bills will fall are not based on any sound economic facts. They are pure guesswork.’
Government policy is based on an assumption that gas prices will continue to rise, but Dr Peiser said the price could fall.
He said: ‘Gas prices are likely to come down very significantly, perhaps by 30 to 40 per cent if the UK Government gives the green light to shale gas exploration. The UK is sitting on a gold mine of shale gas.’
Energy industry expert Joe Malinowski, of TheEnergyShop.com, said he was ‘deeply sceptical’ about Mr Huhne’s claims of lower bills.
The CBI is particularly fearful of the impact of green taxes.
Chief policy director Katja Hall said: ‘Energy intensive industries underpin the UK’s manufacturing sector, making products as diverse as the steel and chemicals needed for wind turbines and low-rolling resistance tyres.
‘The Government is in serious danger of throwing out the baby with the bathwater if it continues to pile new costs on to industries.’
The Government plans to spend £11billion installing smart meters in every property, saying that once people see how much energy they use, they will make cutbacks.
Ministers say energy use will also be reduced by the so-called Green Deal, which will allow people to install double-glazing and loft insulation at no upfront cost.
But a spokesman for consumer group Which? said: ‘If take-up is lower than expected, energy bills will be pushed up even further.’