Energy Minister In Row Over Cost Of Taxes

Energy Minister Michael Fallon has sparked a row over the impact of Government energy taxes after appearing on Sky News.

After SSE became the first firm to hike prices ahead of the winter, Mr Fallon insisted only a "small amount" was added to bills because of Government measures.

He told Sky the cost of measures on energy efficiency and warming the homes of the elderly and vulnerable was "only 4 or 5%".

"There's a small amount added to each bill to help protect the most vulnerable, to keep their homes warm this winter and that's extremely important," he said.

"The bulk of this [rise] is from the energy companies."

He added: "For energy efficiency and to help keep homes warm for the most vulnerable, only 4 or 5% of your bill goes on that so a very small piece on top of it."

But he then clashed with Tony Keeling, SSE's director of customer services, who appeared on Sky to defend the energy company's controversial price rise.

Mr Keeling blamed the hike on three causes - the global cost of energy, the rising cost of getting energy to UK homes and Government schemes.

"About 10% of everyone's bill is effectively extra tax on top of the VAT," the SSE executive told Sky's Eamonn Holmes.

Pressed to clarify his original comments, Mr Fallon agreed the total hit to bills from the Government was "just under 10%".

He said the original figure he gave was for energy efficiency and future investment but conceded "another amount" was also charged to pay for keeping the elderly warm.

Mr Keeling backed the Government's schemes but suggested they should be paid for through general taxation, instead of added to energy bills.

Ed Miliband jumped on the price rise as justification for a freeze

This would allow for it to be targeted at the better-off, he argued, saying: "At the moment it is a blanket charge and some people can't afford that."

The levies pay towards cutting the cost of energy waste and encouraging low-carbon investment as well as helping vulnerable households pay for their supply.

SSE claims transferring the costs of these "environmental and social policies" to the taxpayer would slash up to £4bn from UK energy bills, saving families around £110 each.

It accused policymakers over many years of failing "to highlight adequately the cost to consumers of the policies they have pursued".

But Energy Secretary Ed Davey said: "Half of an average energy bill is made up of the wholesale cost of energy.

"This far outweighs the proportion of a bill that goes to help vulnerable households with their bills and to cut energy waste, and to encourage investment in the new low-carbon energy generation we need to keep the lights on.

David Cameron and Ed Miliband rowed about energy at PMQs on Wednesday

"SSE's own figures show that wholesale price rises have contributed more than policy costs to this price increase, as a share of the bill."

The row comes after Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he wins power in 2015.

The Tories continue to dismiss the vow as a "gimmick" and insist it is not possible, given international fluctuations in wholesale prices.

Coalition ministers also stress they have already taken action to simplify the system with fewer tariffs and make it easier to switch supplier.

But Mr Miliband used the SSE hike to justify his position and claim only Labour would "get a grip" and reform the "broken energy market".

Accusing energy firms of "ripping off customers", he said: "The Government is letting the energy companies get away with it and letting down the British people ...

"The companies are trying to blame everyone else, the Government is trying to blame everyone else. They're responsible, they're not getting a grip."

The Prime Minister's official spokesman insisted he "really, really" understood the pressure on family budgets.

"Hard-working families are seeing budgets squeezed," he said. "I think, in terms of what we are doing, there is legislation so that people are automatically put on to the lowest tariff.

"Of course you would expect the Government to always be looking at what more can be done to help hard-working families."

Labour has been forced to reframe its economic attacks around the cost of living as Britain's recovery continues to gather pace.

Energy prices have become the centre of the argument in recent weeks following Mr Miliband's surprise freeze pledge at his party conference.

Mr Cameron accused the party leader of wanting to live in a "Marxist universe" when the pair clashed about the move at PMQs this week.

Mr Miliband claimed the Prime Minister was ignoring a cost-of-living "crisis" and had chosen to back energy companies instead of consumers.

In an attempt to regain the initiative, the Government has announced action to stop large rail ticket price hikes and is expected to unveil further plans in the coming weeks.

:: A special edition of Jeff Randall Live on Sky News at 7pm tonight will be largely devoted to energy pricing.

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