{"id":94139,"date":"2026-07-21T10:14:52","date_gmt":"2026-07-21T09:14:52","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=94139"},"modified":"2026-07-21T10:14:52","modified_gmt":"2026-07-21T09:14:52","slug":"cutting-vat-on-electricity-does-not-address-our-real-energy-crisis","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/07\/21\/cutting-vat-on-electricity-does-not-address-our-real-energy-crisis\/","title":{"rendered":"Cutting VAT on electricity does not address our real energy crisis"},"content":{"rendered":"

As the Guardian has reported:<\/a><\/p>\n

Electricity bills will be reduced by an average of \u00a345 a year from October, after\u00a0Andy Burnham\u00a0announced the government would remove VAT from them.<\/p><\/blockquote>\n

There are around 25 million domestic dwellings in the UK. Using that as the basis for estimation, this tax cut will result in reduced tax paid of maybe \u00a31.1 billion or \u00a31,100 million.<\/p>\n

For reasons I do not understand, Downing Street said the cost will be \u00a3850 million. I cannot make that figure stack.<\/p>\n

That said, there is a more important dimension to note, drawn to my attention by regular commentator on this blog, Mike Parr. As he has noted, the National Grid paid more than \u00a31 billion in 2024 to manage bottlenecks in the electricity network. Ultimately, this cost is passed on to consumers, at roughly \u00a350 per household. Note the coincidence.<\/p>\n

\n
\n

About 24% of that money went to wind farms that were paid to reduce their output because the grid could not carry their electricity.<\/p>\n

The remaining 76% went to gas-fired power stations, mainly in other parts of the country, to increase output to replace the unusable output of wind farms.<\/p>\n

If the network could carry all the available wind power, Britain would need less gas-generated electricity. That would reduce costs further because plentiful wind power also pushes down wholesale electricity prices, potentially by more than half.<\/p>\n

The situation was foreseeable 16 years ago, yet the necessary action was not taken. Ofgem delayed, while the government treated it largely as a regulatory problem instead of ensuring that the grid was upgraded. The costs were already substantial in 2024 and are expected to be even higher in 2025 and 2026.<\/p>\n

Burnham is playing on the peripheries here. The real question is what is he going to do to make the National Grid fit for purpose, and the UK a low-carbon country?<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As the Guardian has reported: Electricity bills will be reduced by an average of \u00a345 a year from October, after\u00a0Andy Burnham\u00a0announced the government would remove
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