Fact check: Renewables Obligation already set to be reduced for three years

Reform UK promised on Tuesday to “take £200 off the average family’s energy bill” in its first budget.

It said it would do that by scrapping VAT on energy bills, abolishing the Renewables Obligation – a type of subsidy for some energy producers – and the Carbon Price Support, a levy paid by fossil fuel electricity producers.

Here the Press Association assesses the party’s promise against its own methodology.

VAT

In its press release, Reform said scrapping VAT would “cut the average household’s energy bill by around £85 a year”. However, in the notes attached to that press release the party said cutting VAT right now would save each household £78 per year.

Figures from energy regulator Ofgem suggest that the £85 saving might be taken from VAT on the current energy price cap figure, while the £78 mentioned in the notes is the VAT cost the typical household will pay under the next price cap, which will run from April to June this year. This would appear to be supported by Reform’s notes to its press release that incorrectly state that the price cap is currently £1,641. This is the upcoming price cap – the current figure is £1,758.

The Renewables Obligation

Reform said the Renewables Obligation (RO) “adds £100 to the average bill” and said it would scrap it “in full, permanently”.

It is already Government policy that from April 2026 to March 2029, the amount households will have to pay for the Renewables Obligation in their energy bills will be cut by 75%, saving households an estimated £88 per year.

This implies the full RO costs the typical household about £117, meaning Reform’s additional promise to get rid of the final 25% would save households a further £29 per year if implemented from April 1 this year, compared with the current Government policy.

After March 2029, when the Government’s current plan to cut RO expires, Reform’s policy would mean a bigger saving for households.

However, the RO is getting cheaper over time. To account for this Reform adjusted the £117 figure.

Citing Treasury estimates, the party said the RO scheme will cost £8.4 billion in 2025/26, falling to £6.9 billion by 2028/29. However, the Treasury report it cites shows a different figure, saying that the cost in 2025/26 is £8.2 billion, and will not hit £8.4 billion until the year after.

As £6.9 billion is around 18% lower than £8.4 billion, Reform reduced the £117 by 18% to £96, claiming this would be the saving per household in 2028-29.

Recalculating this based on the correct 2025/26 figure of £8.2 billion, the cost will fall by 16% – producing a slightly higher claimed saving of £98 in 2028/29. However, in 2028/29, the 75% Labour discount will still be in place, so the full savings would not come into force until the following year.

Even without policy changes, the cost of the Renewables Obligation is expected to drop significantly over the next decade. The forecast that Reform cited sees the RO cost fall from £8.2 billion in 2025-26 to £6.9 billion in 2028-29. After that it gradually falls to £2.2 billion in 2036/37, after which the RO will end.

The forecast that Reform used was based on retail prices index (RPI) inflation – which the RO has until now been linked to. However, the Government has recently indicated it intends to switch this to consumer prices index (CPI) inflation instead, a change which it hopes to bring in next month. The Treasury document that Reform cited was part of the consultation on this change.

When indexing to CPI instead of RPI, the cost of the RO scheme falls a little faster, from £8.2 billion in 2025-26 to £6.7 billion in 2028-29, and then to £2.1 billion in the last year of the RO scheme.

The Carbon Price Support

The final saving that Reform promised households is to scrap the Carbon Price Support (CPS) which it said “adds £15 to the average bill”. It cited a report from the Centre for British Progress as its source for this figure.

The Centre for British Progress report claims that abolishing the CPS would save £15 per household in 2026-27, however this is forecast to drop over time. In 2029-30, which is the first year after cuts to the Renewables Obligation have expired, the savings from getting rid of the CPS fall to £6 per household. By 2030-31 it will fall to £2 a year.

The report says this is because of changes to the electricity mix over the next decade.

On a separate website, Reform referred to the Carbon Price Support (CPS) as “Labour’s carbon tax”, but said in the notes of its press release that the CPS was “introduced in 2013”. This was during the Conservative-Liberal Democrat coalition government.

Links

Ofgem – Energy price cap explained (archived)

Gov.uk – Budget 2025 (archived)

Gov.uk – What does the Autumn Budget mean for your energy bills? (archived)

Gov.uk – Renewables Obligation Final Consultation Analytical Annex (archived)

Gov.uk – Response to the consultation on changes to inflation indexation in the Renewables Obligation scheme (archived)

Gov.uk – Renewables Obligation (RO) scheme: indexation changes (archived)

Centre for British Progress – Cut bills & boost electrification by removing carbon price support (archived)

Cut my bills (archived)

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