RISHI Sunak’s fossil fuel subsidy could have permanently cut the energy bills of £2 million homes by £342 a year if the Government had invested in insulation measures instead, a think tank has said.
The Chancellor announced a 91% tax break to oil and gas companies alongside the windfall tax on firm’s huge profits last week.
And now, the E3G think tank has calculated that this tax break will give back between £2.5bn and £5.7bn back to oil companies over three years.
Instead, the group has said, an energy efficiency scheme costing £3bn over the same period could upgrade 2.1m homes and make them less dependent on gas.
The research states that the UK Government’s plans “incentivises a slower transition” to renewables and pushes fossil fuel firms to allocate more cash to oil and gas developments instead.
The report also pointed out that there was no mention of energy efficiency in the Chancellor’s emergency support package announcement and without action, household bills will be set to remain high for the foreseeable.
The additional 25% levy on oil and gas company profits, as announced last week, increases the combined tax rate for those firms from 40% to 65%, still way below the global average of 70%. In Norway, Scotland’s North Sea neighbour, the taxation rate is 78%.
Euan Graham, senior researcher at E3G said: “New tax relief on oil and gas investment gives companies handouts for undermining our climate safety.
“The Government could have used this ‘lost revenue’ to supercharge an energy efficiency drive that brings household bills down once and for all. Instead, it pushes for profits to be spent on new oil and gas projects.
“This is the opposite of what’s needed if we want to end our reliance on expensive gas.”
Ministers have argued that more UK oil and gas will provide energy security in the future. However, most of the fossil fuels are owned privately by the firms and the majority is exported outside of the UK.
And, the Government increased the tax relief for investments made in new oil and gas fields from 46.25p in every pound to 91.25p in every pound. E3G pointed out that a significant share (80%) of this increase can be claimed back instantly.
The research adds that this means it is “more likely” that new fields will go ahead, and that as the average construction time of new oil fields is around three years - the 25% additional levy on extraction will not be in place when they start production.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: "The only long-term solution to fuel poverty is improving the energy efficiency of our homes and a move towards a renewable led secure energy supply.
“Sadly, recent government announcements have been neutral on energy efficiency and this research shows they are now in reverse gear on a just transition away from fossil fuels."
Scottish Greens climate and energy spokesperson Mark Ruskell MSP said: “We know that insulating homes will bring down bills, create green jobs, and isolate Putin.
"It is utterly astonishing that Rishi Sunak has instead decided to let the energy giants off the hook with this ridiculous tax relief.”
It comes as another report published on Tuesday by the Tony Blair Institute for Global Change (TBI) found a £4bn annual investment in energy efficiency could permanently halve household heating bills by 2035.
The Treasury has been contacted for comment.
