Consumer Focus report says the money raised from carbon taxes on energy bills should be spent helping consumers

This article is more than 7 years old

This article is more than 7 years old

Money raised from carbon taxes on energy bills should be used to lift millions of households out of fuel poverty and boost the economy, it has been suggested.

The Treasury will receive billions of pounds a year from 2013 as energy companies are made to pay for carbon emissions, and the cost on energy bills will be viewed as a stealth tax unless it is spent helping consumers, ministers were told.

Analysis for Consumer Focus estimates £63bn will be raised in revenues between 2013 and 2027 by making energy firms pay for the carbon they emit, rising from £2.7bn next year to £6.8bn a year in 15 years' time.

The report estimates that households will be paying £21 a year next year, with the cost of the green policies rising to £39 by 2020.

But rising energy bills, mostly driven by increasing gas prices, will see the number of households in fuel poverty - spending more than 10% of their income on heating their homes - grow from 6m to more than 9m by 2016.

Investing the money from carbon taxes in measures such as insulation and efficient boilers in the homes of people struggling to pay their bills could lift up to nine out of 10 households out of fuel poverty, cutting their bills by £200 a year, the report said.

It would also generate up to 71,000 jobs by 2015, and boost the economy in all parts of the country.

Even spending just over one-third (35%) of the billions from carbon revenues to bring in energy efficiency measures in homes that are not extremely expensive to tackle could cut the number of families suffering fuel poverty by 75%.

The analysis by Cambridge Econometrics and Verco suggested it would be a more effective way of boosting the economy than using the money to invest in infrastructure, general government spending or cutting fuel duty or VAT.

The Consumer Focus report, which is backed by the Energy Bill Revolution coalition of organisations and companies, said spending money from carbon taxes would tackle fuel poverty much more effectively than the government's plans.

Alongside the new "green deal" scheme, which will cover the upfront costs of energy improvements and allow householders to pay the money back through savings on bills, there will be a new requirement on energy companies to help fuel-poor homes improve energy efficiency.

But the Energy Company Obligation (ECO) will only lift around 250,000 homes out of poverty, Consumer Focus said, while overall insulation rates are expected to fall.

Mike O'Connor, chief executive at Consumer Focus, said: "We need to make heating our homes more affordable, cut carbon emissions and achieve economic growth.

"Using carbon taxes to ensure our homes leak less energy represents a triple-whammy.

"This would simultaneously improve the quality of life of millions of people, slash carbon emissions and generate greater economic growth than other measures."