Octopus Energy has described the recent VAT reduction on electricity announced by new Prime Minister Andy Burnham as a “hugely positive” step. Greg Jackson, CEO of the energy company, welcomed the Labour leader’s move, highlighting its significance in easing the financial burden on British households.
The VAT cut, set to take effect from October, is expected to save a typical household approximately £45 annually. Octopus Energy has confirmed it will immediately pass these savings on to customers through reduced rates when the measure comes into force.
Speaking on the issue, Mr Jackson said: “At a time when geopolitical issues, such as the conflict in Iran, are pushing energy prices higher, this VAT reduction, alongside the government’s earlier decision to cut £135 of levies from bills in April, offers much-needed relief to consumers.”
READ MORE: DWP Warned of Employment Crisis Among Over-50s Comparable to NEETs
READ MORE: HMRC Confirms £70 Pension Tax Relief Letters Are Genuine
He acknowledged that although the war is likely to cause a 2-3% rise in energy prices come October, these increases would have been steeper without the government’s interventions. Mr Jackson also addressed public concerns over standing charges, which many feel are excessive. “Standing charges continue to rise due to increasing costs associated with running and upgrading the grid. We are actively advocating for systemic changes to reduce these base costs.”
To support those struggling, Octopus Energy offers assistance, including standing charge holidays via their Octo Assist fund. Mr Jackson added: “Today’s VAT cut is an encouraging sign that the government is prioritising efforts to reduce electricity bills. However, more comprehensive reforms are needed, such as reducing reliance on expensive gas, investing in smarter local energy technologies, and eliminating distorted levies on electricity, which could collectively reduce bills by a further £200.”
He emphasised that lowering electricity prices would also promote broader adoption of cleaner heating and electric vehicles, benefiting both households and businesses.
Meanwhile, Siobhan Doyle, a consumer writer at Carwow, commented on the VAT cut’s implications for electric vehicle (EV) ownership. She noted that removing VAT on domestic electricity underlines the disparities in EV access, adding: “To make electric vehicles truly accessible and equitable, it is essential to equalise VAT rates on public and home charging.”
Simon Williams, head of policy at the RAC, urged the Prime Minister to consider reducing VAT on public EV charging to help those without home charging options transition to electric motoring more affordably.