Badenoch urges energy bill tax cuts before any household bailout

Calls for tax cuts first

Conservative leader Kemi Badenoch has said the government should cut taxes on energy bills before considering bailouts for households.

Speaking on the BBC's Sunday with Laura Kuenssberg programme, Badenoch said direct payments would come with a cost in the form of higher taxes. However, when pressed, she did not rule out such support if energy bills spike.

She said the government should focus first on "taking the burden off everybody" by reducing taxes on bills, and accused ministers of prioritising people on benefits while increasing taxes for others.

Pressure over rising prices

The debate comes after Chancellor Rachel Reeves said the government would support "those who need it most" if energy bills rose sharply because of the US-Israeli war with Iran.

Iran has effectively blocked the Strait of Hormuz, a major oil shipping route, pushing up wholesale oil and gas prices. Although energy bills for millions of households in England, Scotland and Wales are due to fall for three months from April under Ofgem's price cap, they are expected to rise afterwards because of the conflict's impact on markets.

The current government has signalled that any support package would not necessarily be universal. Reeves has said any measures would be limited by the government's borrowing rules and its aim of keeping inflation and interest rates as low as possible.

Party positions on support

The Conservatives have already pledged to scrap green levies on energy bills, including the Renewable Obligations Certificate and the Carbon Tax, which help fund renewable energy projects. Badenoch said she was "not ruling out anything" on direct payments, but argued ministers should begin by removing taxes from bills.

She also said large bailout schemes should not be treated as cost-free, pointing to the rise in interest rates after government support during the Covid pandemic. Under Liz Truss, the previous Conservative government also provided universal help with energy bills after Russia's full-scale invasion of Ukraine.

Other parties have taken different positions. Liberal Democrat leader Sir Ed Davey has suggested universal support with energy bills, while the party's energy security spokeswoman Pippa Heylings said ministers could not ignore families outside the benefits system who were already facing a cost of living crisis. The Green Party has said ministers should guarantee that bills will not rise in July, when the price cap is updated, and Reform UK has said it would scrap VAT and green levies on household energy bills if it won power.

North Sea debate

The Conservatives are also urging the government to maximise domestic oil and gas production in the North Sea and end the windfall tax on oil and gas companies.

Badenoch acknowledged that expanding drilling would not directly lower household bills, but said the profits and tax revenues could be used to subsidise them. The government has banned licences for new oil and gas fields in the North Sea, although it says oil and gas will remain part of the UK's energy mix for years to come.

Education Secretary Bridget Phillipson defended that stance as "pragmatic", saying the UK needed to reduce its reliance on fossil fuels and invest more in home-grown energy. Reform UK's Zia Yusuf said previous Conservative governments had themselves increased taxes on North Sea drilling and introduced green levies on energy bills.