UBS says one-off cuts to household energy bills will not solve the UK’s underlying problems with how energy is priced and paid for.
The bank argues that while scrapping VAT and green levies would ease pressure in the short term, the bigger task is to overhaul price caps and the way system costs are spread across consumers.
The comments come after a report in The Times that the chancellor is considering removing the 5% VAT and £215 of green levies from bills in November’s budget.
UBS reckons that would be a relief for suppliers such as Centrica PLC (LSE:CNA) and E.ON, but stresses the need for a longer-term fix.
In a note it said: “Immediate relief would be positive in the short-term. In the long-term, the way energy and system costs is priced and to different groups of consumers needs to be addressed in a way that was not under price caps.”
The bank highlights ongoing workstreams, including the government’s call for evidence on the future of price caps and Ofgem’s consultation on debt relief, as key steps towards reform.
With 13% of households in fuel poverty and average annual bills up 12% since the 2024 election, UBS warns that tinkering with tax and levies will not be enough to defuse the issue.