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Energy measures to cut green levy on bills

The government is introducing measures to cut household energy bills by an average £50 a year, funded through closing tax avoidance loopholes.

The shake-up involves reducing the ‘carbon emissions reduction obligation’ element of the ECO (Energy Company Obligation) by 33% up to 2015, with more funding for individual householders’ energy efficiency measures coming from general taxation rather than a levy on everyone’s bills. New homeowners will be offered £1,000 to spend on energy saving measures.

Lib Dem president Tim Farron MP told BBC One's Sunday Politics: “We’re not scrapping the investment, we're just making sure it's funded from general taxation.”

But the insulation industry is furious, saying the changes will cost thousands of jobs and are the result of an “unscrupulous” distraction campaign by the big energy firms.


The government is establishing a rebate to save the average customer £12 on their bill for the next two years, and reducing the cost of the ECO will take a further £30-35 off bills.

The government will ensure its overall approach is carbon neutral; introducing a scheme to support private landlords to improve the energy efficiency of their properties and spending £90 over three years to improve public sector buildings.

Funds for Green Deal Communities will be increased from £20m to £80m.

Energy and climate change secretary Edward Davey said: “Energy bills are a big concern for many people, which is why we’ve been working to reform the energy market, increase competition and make it easier for people to shop around and switch supplier. Today’s announcement confirms a serious, workable package which would save households around £50 on average.

“Today’s package also ensures that energy companies are not off the hook. They will keep up their efforts to help people in fuel poverty cut their bills by making sure their homes leak less heat, and they will have to be more transparent about what they’re spending on social and environmental measures. Next year, our competition test will forensically examine what more we can do to get prices down through ferocious competition.

“This won’t affect our commitment to tackling dangerous climate change through reducing Britain’s CO2 emissions, which will be backed by £540m in new investment to make sure Britain’s homes and public sector buildings are more energy efficient, permanently reducing their bills.”

But Andrew Warren, director of the Association for the Conservation of Energy, which represents the insulation industry, said: “It is absolutely disgraceful that the big energy companies have orchestrated this unscrupulous campaign, that appears to be succeeding in blackmailing the UK government into cutting by half its established policy to require energy companies to help customers stop wasting money by wasting fuel.

“There has been no increase whatsoever in the levels of social and energy saving obligations placed upon the Big Six this year. This concerted attack on the Energy Company Obligation is predominantly a distraction technique, designed to draw attention from the price gouging they are practising. The extent to which the ‘big six’ currently overcharge customers is estimated by the founder of one of their smaller competitors, Ovo, at £3.7bn a year.

“Home energy use has dropped by a quarter since 2005, largely owing to the installation of energy saving measures. This has cut the energy companies’ turnover badly. That is why they are trying to destroy the only nationwide energy saving programme. But because the costs per kilowatt hour have more than doubled over the same period, the proportion of household budgets spent with the ‘big six’ energy companies has risen sharply.

“It is completely perverse logic, to help cut fuel bills, to cut the one programme that helps householders cut fuel bills. There are already 7,000 fewer people employed today than in November 2012 in delivering energy efficiency in homes.

“The result of halving the ECO programme will be that at least 10,000, possibly 13,000, fewer people will be employed in our sector next year than anticipated. These are mostly not in household-name companies, nor even in SMEs. Decimating the ECO hits hardest at precisely the kind of micro start-up businesses which the UK has been dependent upon to lead us out of recession.”

Ann Robinson, director of consumer policy at, said: “This is a welcome reduction to energy bills coming at a time when over eight in ten households were expected to be rationing their energy use this winter for fear of cost. We would now urge suppliers to pass these cuts on as swiftly as possible so that consumers can feel the benefit immediately.

“The fact that the part of ECO that helps vulnerable consumers will continue at its present level and that Green Deal is to be strengthened and streamlined is particularly welcome.”

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