On October 19, 2025, UK Energy Secretary Ed Miliband set political circles abuzz by hinting that the government could cut the rate of VAT on energy bills—a move that could bring much-needed relief to millions of households grappling with rising costs. Speaking on BBC’s Sunday with Laura Kuenssberg programme, Miliband was pressed about whether the government would consider scrapping the 5% VAT rate on domestic energy bills in the upcoming Budget, set to be delivered by Chancellor Rachel Reeves in November. While he declined to confirm any specific measures, his comments made clear that the government is actively exploring a range of options to tackle what he repeatedly called the country’s “cost-of-living crisis.”
“We face a cost-of-living crisis, a longstanding cost-of-living crisis, that we need to address as a government,” Miliband told the BBC. “We also face difficult fiscal circumstances... so obviously we’re looking at all of these issues.” His words echoed the growing pressure on the government to reduce household energy costs, a political battleground that has only intensified as winter approaches and bills continue to climb.
The numbers are stark. Just this month, energy bills for millions of households rose by 2% under the energy regulator Ofgem’s price cap. A typical household now pays £1,755 a year—an increase of £35 from the previous cap. And while that’s a far cry from the jaw-dropping peak of £4,059 seen in January 2023 (when global energy markets were roiled by Russia’s invasion of Ukraine), prices remain high by historical standards. According to Ofgem data cited by BBC News, bills have fluctuated since that peak, dropping to £1,568 in July 2024 before rising again, with recent figures hovering between £1,720 and £1,755 in late 2025.
The government’s possible solution? Scrapping the 5% VAT on domestic energy bills. According to the charity Nesta, this measure would save the average household £86 per year. But there’s a catch: it would cost the Treasury an estimated £2.5 billion annually—a hefty sum, especially as Chancellor Reeves faces a fiscal hole estimated at up to £30 billion. September 2025 calculations put the cost slightly lower, at £1.75 billion per year, but the bottom line remains daunting for a government already under financial strain.
Labour, now in power, pledged before the election to lower average energy bills by £300 a year by 2030. Miliband reaffirmed that commitment on Sunday, stating, “I know my job is to get bills down by 2030. Absolutely, we look at those things.” He emphasized that high bills are not just a short-term crisis but a symptom of deeper issues. “The reason bills are so high is because of our dependence on fossil fuels,” he said. “There is only one route to get bills down, which is to go for clean power, home-grown, clean energy, that we control, so we’re not at the behest of the petrol states and the dictators.”
The government is also considering reducing regulatory levies known as “policy costs” on energy bills. These levies, which fund environmental and social schemes like subsidies for renewables, made up around 16% of the average electricity bill and 6% of the average gas bill last year, according to BBC News. Some energy industry leaders and the government’s independent adviser, the Climate Change Committee, have argued that these green levies contribute to high bills and should be removed from electricity bills to help consumers feel the benefits of the net-zero transition. Miliband acknowledged the complexity: “That’s always a judgement for the chancellor, but let’s be honest we know we’ve got really difficult fiscal circumstances that we inherited... but absolutely we look at those things.”
Chancellor Rachel Reeves, for her part, confirmed last week that she is planning “targeted action to deal with cost-of-living challenges” in the upcoming Budget. The BBC understands that this could also include reducing some of the regulatory levies currently added to energy bills, though details remain closely guarded. When asked directly about the potential for VAT cuts, the Treasury responded with its usual reticence: “We do not comment on speculation.”
The debate over how best to reduce energy bills has become a flashpoint for broader political disagreements about the UK’s energy future. The Conservative Party and Reform UK have laid blame for high energy costs at the feet of net-zero policies. Both parties have proposed scrapping the Climate Change Act—which legally requires the UK government to reduce emissions to net zero by 2050—as well as ditching carbon taxes on electricity generation and cutting funding schemes for renewables. Shadow energy secretary Claire Coutinho told the BBC, “Our plans would cut electricity bills for everyone by 20%. [The public] care about climate change but what I don’t think they are signing up for is much higher bills and jobs being lost to countries abroad.”
Other opposition parties see things differently. The Liberal Democrats have accused the Conservatives and Reform UK of wanting “to tie the UK to expensive fossil fuels and foreign dictators like Vladimir Putin.” Pippa Heylings, the party’s energy spokeswoman, called for the government to “break the link between gas prices and electricity costs.” She explained, “People aren’t seeing the benefit of cheap renewable power because wholesale electricity prices are still tied to the price of gas.”
The Green Party, meanwhile, has argued for more radical change. Leader Zack Polanski advocated nationalizing energy companies to cut costs for customers and proposed a new tax on carbon emissions to drive fossil fuels out of the economy. When asked whether such a tax would simply be passed on to consumers, Polanski was adamant: “The tax would be vital for tackling the climate crisis. What we need to be doing is finding other ways to support particularly small and local businesses... We know the big corporations are destroying our environment, our democracy and our communities. They can make a profit, sure, but this isn’t about squeezing out every single profit they can make.”
As winter looms and household budgets tighten, the political stakes are high. Within the government, there are concerns that support for net-zero policies could falter if consumers are hit with even higher energy costs. Miliband acknowledged this tension, stressing the need for balance: “We have to invest in aging electricity infrastructure, but there needs to be a balance between public expenditure and levies.”
All eyes are now on Chancellor Reeves’s November Budget. Will she deliver the VAT cut that so many are hoping for? Or will the government look for other ways to square the circle of affordability, climate commitments, and fiscal discipline? For now, the public—and politicians across the spectrum—are left waiting, watching, and hoping for a break from the relentless pressure of rising bills.
Whatever the outcome, the coming months promise to be pivotal for the UK’s energy policy and for the millions of households hoping for relief from the cost-of-living crisis.
