Stealth tax could be slapped on thousands of families in net zero drive
Ofgem could launch a review this summer into how electricity network and other costs are charged on household bills
Middle-class families could face higher energy bills than poorer households to fund the transition to net zero, the boss of Britain’s energy regulator has suggested. Jonathan Brearley, the chief executive of Ofgem, said the regulator would launch a review of bills this summer that would look at whether to “do something related to income”.
Speaking at an industry event, he said: “Over the next few years, we do expect variable costs to come down, but the proportion of costs that are fixed will rise, which, if unchecked, could exacerbate inequalities that we see today. So, in the summer, we are launching a wide-ranging examination of how we best allocate costs within the energy system from first principles. We will look at the best way to share out costs, including the incentives they put on consumers.”
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He added: “We want to at least ask the question – whether or not we can allocate costs more progressively,” noting that any attempt to “do something related to income” would be logistically challenging.
Economists use the term “progressive” to mean people pay higher tax rates as their income increases.
The proposal could be controversial because it would amount to a stealth income tax to fund net zero.
Household energy arrears hit a record high of almost £3billion at the end of last year, according to the energy watchdog.
This is partly linked to the 2021-22 energy crisis when consumers’ bills soared because of gas market disruption as economies reopened after the Covid pandemic and following Russia’s full-scale invasion of Ukraine.
In the run-up to the General Election last year, Labour promised to reduce annual household energy bills by £300 by 2030, although there are doubts about the reality of this.
The UK energy price cap on bills has climbed from £1,568 per year in July 2024, when Labour won the election, to £1,849 this month.
Mr Brearley called for a more “enduring and strategic” approach to energy affordability.
