uSwitch: Gordon tests his green credentials, but doesn't remove VAT from green electricity tariffs

More than half of Britons (53%)1 think the Government should incentivise green tariffs for electricity at home

Almost three quarters (72%)1 would expect the Government to reduce or remove VAT on energy efficient products (for all) Budget will fail to encourage consumers to switch across to green electricity - only 200,000 (0.33%) of population have a green tariff After much flexing of green muscles, Gordon Brown's budget today will disappoint those expecting some simple steps to help British consumers get behind the move to reduce carbon emissions, says uSwitch.com, the independent comparison and switching service.

Rather than grabbing headlines by removing stamp duty on all new build zero-carbon homes (valued up to ?500,000) he could have focussed on measures that would allow the average householder to reduce their carbon emissions, without damaging their wallet.

Recent research commissioned by uSwitch.com1 shows that people would like to see a 'carrot' or incentive for change.

In fact, over half (53%) believe that the Government should give people an incentive to go onto green electricity tariffs at home and almost three quarters (72%) would expect the Government to reduce or remove VAT on energy efficient products or services to encourage greater take-up.

They will welcome news that Brown is exploring the idea of a European-wide move to reduce the VAT from 17.5% to 5% on energy saving and environmentally friendly products in the home, but will want to see a swift and positive outcome.

Although Brown has made some moves in the right direction by offering grants to pensioners for installing insulation and central heating in their homes, he will not have gone far enough to satisfy the majority of consumers and, by not removing the 5% VAT on green energy tariffs, has missed the opportunity to encourage greater take-up of green tariffs and potentially galvanise the energy companies into taking more action.

At the moment only around 200,0002 customers are on green electricity tariffs, but there is capacity in the UK for far more people to sign up.

Green tariffs are currently 4%3 more expensive than standard tariffs, which on average adds ?133 a year onto green electricity bills.

Removing the 5% VAT would flip this around to make green tariffs ?53 a year cheaper than standard tariffs.

People are concerned about environmental issues - 44% see climate change and global warming as the most important energy-related issue.

However, almost a third (32%) of people think that the cost of domestic energy is the most important issue.

Given the huge hikes in energy bills in 2006, perhaps this is not so surprising.

But it also explains why there is a recurring theme of acceptance that the UK needs to go green, accompanied by a reluctance over the costs and concern over who will end up footing the bill.

In fact, 40% say that Government and opposition plans to make the UK go green are a necessity, but are concerned over how much it will cost them as an individual, while a further 17% accept that the UK going green is a good idea, but don't see why they should foot the bill.

Although 41% would be prepared to pay ?1 - ?50 extra to get their energy from a sustainable/renewable source, for some, cost is an over riding concern - over a third (39%) of people say that they would not be prepared to pay anything extra.

More worryingly, almost a third of people (30%) say that they would not care where their energy came from as long as it meant cheaper bills.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "It looks as though Gordon Brown is going for the right approach in using carrots rather than sticks to win public support for the battle to reduce carbon emissions".

"Unfortunately, on this occasion he hasn't gone far enough and has missed the opportunity to provide the biggest incentive to get people onto green tariffs - removing the VAT.

While people are concerned about the cost of energy it is difficult to see how we can achieve a step change if it is going to cost them more".

"Removing the VAT would on average make green tariffs cheaper than standard tariffs, enabling people to save money and help save the planet".

""At the moment, with only 200,000 people on green tariffs but a capacity for far more, the energy companies could be forgiven for thinking that people are not that interested.

But if people moved en masse to green tariffs, the suppliers would be forced to sit up and take note.

They would also have a huge incentive to be doing more than the bare minimum required to meet their renewable obligations".

""People are ready to be won over and do their bit to help the UK achieve carbon reduction".

"But there are huge concerns over the cost to the individual and a clear need for greater education on what the effort would entail".

"There also needs to be greater clarity over what a green tariff is, as every supplier seems to have a different definition".

"If the Government gets this right they could successfully harness this huge groundswell of public sentiment and turn it into a massive force for change".

"But if they get it wrong and the public loses interest then this could turn the UK's efforts to go green into an uphill battle wading through treacle." Other interesting facts from the research: Almost a quarter (23%) of people think that Government and opposition plans to make the UK go green will just be an excuse to put taxes up, while a cynical one in ten (11%) think it is just a political bandwagon Over a quarter (28%) would be happy for standby facilities to be removed from electrical products, even if they cost more as a result Only 21% of people think that they have enough information to be able to live a more energy efficient lifestyle.

How green tariffs would compare with standard tariffs if they were made VAT exempt Supplied by uSwitch.com and correct at 21/3/07.

Based on a medium user (3,300 kWh electricity) paying by monthly direct debit, for green and for standard tariffs Currently: The average bill size for the selected green tariffs stands at ?392 including VAT On this basis customers are paying on average a ?13 or 4% premium for green tariffs If VAT was removed: The average bill size for the selected green tariffs excluding VAT would be ?373 On this basis customers will pay on average a ?5 or 2% premium on standard tariffs as opposed to green tariffs To see the release in full complete with tables, please click on the link at the of this release.

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