Halfway there: Government ditches green levies to reach energy bills goal

Despite increasing political pressure on the government’s pledge to reduce energy bills by £300, it remains a key plank of their clean power agenda. Two significant announcements in the Budget on Wednesday saw the government declare that they will remove around £150 of costs on average from household energy bills from April next year. 

In a move which has long been opposed by the Treasury, the government confirmed that 75% of the Renewables Obligation (RO) scheme costs will be moved from bills to general taxation, which amounts to £88 of the savings. The Office for Budget Responsibility (OBR) expect this move will see roughly £2.3bn a year of green levies be removed from household electricity bills. More controversially, the government also decided to scrap the Energy Company Obligation (ECO) scheme, a move which Ed Matthew, UK Programme Director at the independent climate change think tank E3G, described as “morally indefensible”, due to the success the scheme had for providing a long-term solution to fuel poverty. Ending the ECO scheme is expected to save a further £59, as well as a £7 VAT saving from these measures – this is estimated to take £150 off the average energy bill (a rounding of the £154 average per household figure). 

This is a welcome development for Ed Miliband to preserve his clean power agenda after Reform had increased their attacks on energy bills in recent weeks. Nigel Farage pledged earlier this month that he will cut energy bills by introducing policies such as scrapping net zero subsidies and extracting more oil and gas from the North Sea. The increasing scrutiny on the government’s commitment to the clean power agenda was highlighted by a September 2025 report from More in Common, which found that the cost of living has remained as Britons' top concern since they started their biggest issues tracker in 2022. It also found that Britons have little confidence in the government to reduce bills – 43% either believe the government has no plan or one which is making things actively worse.

Chris Stark, Head of Mission Control for Clean Power 2030, welcomed the Budget and described it as, “the beginning of a critical phase for Clean Power 2030... In the coming days, we'll say more about the reformed connection queue for 2030. We will shortly have the final price determination from Ofgem for the 2030 transmission build. Then in January we'll have the results of AR7 - which will be crucial in securing the clean generation we need.”

The government’s enthusiasm was dampened somewhat by analysis from Cornwall Insight principal consultant Craig Lowrey, who said it is important to be "realistic" about what the measures achieve. He added: “Shifting some levies around does not remove the costs of running and decarbonising our energy system, it simply changes how they’re paid for… The long-term solution is a low carbon system that delivers stability and protects us from the volatility of fossil fuel prices. That takes serious upfront investment and an honest conversation about how we share those costs fairly."

While these moves will bring the government closer towards easing concern over household energy costs and safeguarding Labour’s clean power mission, the debate over long-term affordability is far from settled. Moving levies to general taxation and ending schemes like ECO may offer immediate relief, but trouble lies ahead. Last week’s announcement from Ofgem that the average annual energy bill will rise by 0.2% in January, despite wholesale costs falling shows more must be done to further neutralise this issue, saw Energy Minister, Michael Shanks, admit that "there's no shortcut" to bringing down prices.