Budget 2026: Green levies stripped from energy bills

Chancellor John Healey has announced plans to eliminate green levies from energy bills and incorporate environmental funding into the broader tax system, as reported by BBC News. This decision comes as a significant shift in the government's environmental agenda, aiming to alleviate the impact of the Iran war on UK households. Healey stated that for years, policy costs were loaded onto household bills through levies under Conservative governments, and he intends to put an end to this practice.

Analysts predict that energy costs will surge by approximately 27% in January due to ongoing conflict in the Middle East. To counteract this rise, Healey announced several measures, including the removal of standing charges from bills, which will save the average home around £27. Additionally, the VAT cut on electricity bills and a 5p discount on fuel duty, both set to expire in April, will be extended.

The Chancellor also unveiled a targeted support scheme for households in lower council tax bands, to be paid directly into their bank accounts. This measure will be shared among the governments of Scotland, Wales, and Northern Ireland, and Healey urged them to implement similar assistance for their residents. The move is expected to be revenue-neutral, with the surcharge shifting into general taxation.

The levies, initially intended to fund renewable energy projects and subsidize green energy schemes, have become a source of frustration for households and businesses, contributing to the UK having the highest energy bills among major economies.