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Ross Clark: Osborne May Go To War On Green Taxes To Cut Bills

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Ross Clark, Daily Express

A week ago Ed Miliband celebrated victory in the party conference season. The polls had swung in his favour and all, it seems, thanks to a promise to freeze energy bills for 20 months.

In a Britain weary from years of rising costs and static incomes a promise of relief for household finances was bound to be greeted with cheers. Conservatives did not seem to know how to react. First, they condemned Miliband’s interference in energy markets as “Seventies-style socialism”; then, when they could see it was playing well with voters they, too, started muttering about greedy energy companies.

Yet the Conservatives have a trump card, and one that it seems George Osborne is toying with the idea of playing in his autumn financial statement.

For he has it within his power not just to freeze energy bills but to cut them permanently, not just for 20 months. He can do this by relaxing some of the green levies which this year are adding an average of £112 to household gas and electricity bills, and which by 2020 are projected to add nearly double that to bills.

It was breathtaking hypocrisy of Miliband to try to make political capital of high energy bills. As energy secretary in Gordon Brown’s government, he was personally responsible for introducing many of the levies that are hidden in our bills. This year, for example, we are all contributing £21 to the Renewables Obligation – the extra cost which energy companies must pay to buy a proportion of their electricity from expensive renewable sources such as wind farms.

We are paying another £21 towards feed-in tariffs: the subsidies paid to domestic customers who have fitted solar panels to their properties. The high upfront cost of installing such generation equipment has ensured that it is mostly better-off households that have benefited from feed-in tariffs – with the result that the poor are effectively subsidising payouts to the wealthy.

Another £27 from the average annual energy bill goes towards the Energy Company Obligation, under which energy companies are forced to pay for insulation and other green improvements to householders who are on income support. Of all the levies this is perhaps the easiest to justify, but the fact that the cost is levied on bills rather than paid out of general taxation ensures that the burden falls regressively on the less well-off.

There is also the EU Emissions Trading Scheme, which adds £13 a year to bills. This obliges the owners of coal and gas-fired power stations to buy permits in order to emit carbon dioxide. The burden, of course, is passed on to consumers.

But these costs are only the start. They are projected to rise sharply as renewable energy tries to make up for the closure of coal and nuclear plants. At present, renewables account for just 11 per cent of electricity generation in Britain.

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