Remove VAT from Energy Bills for Three Years Tories Urge

Published: March 30, 2026. The English Chronicle Desk. The English Chronicle Online—Providing trusted news and professional analysis for the UK.

Conservative leader Kemi Badenoch has intensified her “Cheap Power Plan” campaign, formally calling on the Government to abolish VAT on domestic energy bills for the next three years. The proposal, unveiled during a high-profile visit to an oil rig in the North Sea, is positioned as a direct challenge to the Labour administration’s current fiscal strategy. Mrs. Badenoch argued that the 5% tax on heating and electricity is a “levy on the basics of life” that should be suspended immediately to shield households from the global price shocks triggered by the ongoing conflict in the Middle East. According to Conservative party analysis, removing VAT, combined with the scrapping of various “green taxes,” could save the average UK household approximately £200 per year at a time when the energy price cap is once again under upward pressure.

The Conservative leadership’s push for tax cuts represents a sharp departure from the Government’s preference for targeted support. While Chancellor Rachel Reeves has previously used the Budget to shift some renewable energy costs from bills to general taxation—a move that will see the price cap fall by roughly £117 this April—the opposition argues that these measures do not go far enough. Mrs. Badenoch’s plan seeks to go further by repealing the Climate Change Act and halting what she describes as “welfare bailouts” for those on benefits, which she claims are being funded by taxing working families. The Tories maintain that the £2.5 billion annual cost of the VAT holiday could be offset by maximizing North Sea oil and gas extraction, which they believe would generate significant new tax receipts for the Treasury.

The timing of the proposal is highly political, coming just as millions of households prepare for the resetting of the energy price cap. While the Government has successfully implemented a 75% subsidy on the Renewables Obligation (RO) scheme until 2029, the opposition claims these “salami tactics” are insufficient to counter the “Trump tax” of rising global oil prices. However, the plan has faced stiff resistance from the Treasury. Exchequer Secretary Dan Tomlinson dismissed the Tory strategy as a “dangerous fantasy,” noting that even the most aggressive North Sea drilling would have a negligible impact on international wholesale prices. Critics also point out that scrapping VAT on energy would disproportionately benefit wealthier households with larger homes, rather than focusing aid on the fuel-poor.

As Prime Minister Sir Keir Starmer prepares to meet with energy industry leaders this week to discuss the impact of the Strait of Hormuz blockade, the debate over VAT has become a central fault line in British politics. For the Conservatives, the three-year tax scrap is a centerpiece of their “Get Britain back on Track” manifesto, designed to present a clear alternative to Labour’s Net Zero transition. For the Government, maintaining the current VAT structure is seen as essential for funding the very clean energy projects they believe will eventually break the UK’s dependence on volatile fossil fuels. With inflation figures expected to fluctuate as the war continues, the battle over the “5% tax” is set to dominate the Westminster agenda for the remainder of the spring.

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