VAT cut will provide some relief, but more support needed

Government announces the removal of VAT from electricity bills

Posted July 21, 2026

Speaking in response to the Government’s announcement of the removal of VAT from electricity bills Steve Vaid, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said:  

“This change will bring some relief for households who will welcome help with energy bills, but much more support is needed. We hope that the Budget will bring more significant measures to support low-income households. 

“There is an urgent need to deal with built-up energy debts. The first phase of the energy Debt Relief Scheme has been designed, but it needs the Government to make the decision to press go and inject some urgency to deal with this crisis. Ministers should move ahead with the scheme now to provide urgent respite for people who’ve built up energy debts through no fault of their own. 

“With nearly half (46%) of the people we support at National Debtline not having enough money to even cover their essential bills, it is clear households desperately need support with the cost-of-living, support to build financial resilience and increased access to advice to help them find a way forward.” 

National Debtline Figures 

  • Energy debt is the second most common debt type National Debtline advisers hear about 
  • Over a third (38%) of people who contact National Debtline have energy debt 
  • On average, people who contact National Debtline with energy debt owe £2,575 

Ofgem Debt Relief Scheme  

Ofgem’s proposed Debt Relief Scheme is designed to tackle the build-up of unpaid energy bills from the energy crisis by allowing suppliers to write off a portion of customer debt, with costs spread across the wider market. The aim is to support households struggling with arrears, reduce debt pressures on suppliers and create a more sustainable system for managing energy debt going forward.   The announcement of the scheme followed our Help To Repay campaign, backed by 14 charities and other organisations. 

Phase 1 which is expected to support 200,000 people in receipt of means-tested benefits and reduce the levels of energy debt by £500m has been consulted on. The regulator has yet to confirm firm timelines for when this will be implemented. Phase 2 which would support a wider group of customers has yet to be consulted on.