London, UK - The UK government has announced a cut of the 5% VAT rate on electricity bills, saying this will reduce electricity bills by around £45 a year.

The move will also reduce the ratio between electricity and gas prices from 3.6 to 3.4, Nesta’s analysis finds.

Nesta proposed the VAT cut on electricity bills as part of a package of reforms to reduce energy bills and help more people switch to heat pumps and other low carbon technologies. Nesta also proposed that the government abolish the gas standing charge, moving the cost into gas unit rates, and move legacy policy costs from electricity bills onto general taxation.

Andrew Sissons, director in sustainable future at Nesta, said: “It is positive that Andy Burnham has kicked off his time in Number 10 by cutting electricity costs and making decarbonisation a bit easier. Dropping the 5% VAT rate on electricity bills delivers immediate relief to households struggling with day to day costs and narrows the gap between electricity and gas prices that discourages people from switching to clean heating and cooling technology. This first energy reform will be funded over the crucial winter period and up until April, so November’s Budget would be the right opportunity for the new Chancellor to set out a wider and more long-term set of reforms to reduce electricity costs.”

Notes to Editors

1. For more information on the analysis or to speak to one of the experts involved, please contact Kieran Lowe, Senior Media Manager, on 020 7438 2576 or [email protected]. Spokespeople are available for broadcast interviews.

About Nesta

Nesta is a research and innovation foundation that designs, tests and scales solutions for the biggest challenges of our time.

Driven by a vision to improve the lives of millions of people, our focus up to 2030 is on three missions: breaking the link between family background and life chances, halving obesity and cutting household carbon emissions.

We work with partners to develop high-potential solutions and test them as they evolve, drawing on expertise in qualitative and quantitative research, data science, behavioural science and design.

Once confident in the effectiveness of a solution, we take it to scale. We create national policy proposals, develop consumer-facing products and services, build and spin out commercial ventures and harness the power of the arts.

We work with two specialised units: BIT applies a deep understanding of human behaviour to help clients achieve their goals. Challenge Works designs and runs challenge prizes to spark innovation in science, technology and society. Find out more at nesta.org.uk