Top Labour donor calls on government to 'go the whole hog' in energy bill reform to save households £400 a year

A leading Labour donor has urged the government to "go the whole hog" in a shake-up of energy bills to save the average household a claimed £400 a year. Andy Burnham has already asked Chancellor John Healey and Energy Secretary Miatta Fahnbulleh to look at removing standing charges from gas bills. The fixed daily fees cover the costs of gas connections but are a major gripe for households as they are applied regardless how much energy is used.

It comes as the PM made one of his first announcements on taking over the removal of VAT from the electricity element of bills over this winter. But Dale Vince, the millionaire owner of energy firm Ecotricity, says he would like to see the government go further by removing VAT and standing charges from both fuels. To see more of the stories you love from The Mirror and to find them easily in Google then make us your preferred source. Free and easy-to-do, just click on the link here to find more from The Mirror at the top of your feed.

"The government has done the right thing by removing VAT on electricity bills," he said, while adding "electricity is not a luxury but nor is gas. "Why stop there with half a job done at the Budget ? Let's have some consistency. Why one and not the other? The government should go the whole hog and remove VAT and standing charges on electricity and gas bills. That’s worth £400 on a typical yearly bill." He went on: “VAT is a luxury tax, energy is not a luxury, it makes sense to remove it.

By the way there is no VAT on air conditioning units or heat pumps but there is on gas boilers - pointing to a wider inconsistency in the way this tax is applied. "Standing charges are a charge for being connected to the grid. People pay them whether they use energy or not. That affects people that use the least, the most. These changes would help the five million people in our country who are in energy poverty the most. " It has been suggested the gas standing charge could be included in the unit rate households pay instead, benefiting lower usage customers.

But some campaigners say it could penalise vulnerable customers who need to use a lot of energy for medical reasons. Any change to the standing charge is highly unlikely to come this winter. Mr Vince's suggestion comes as Chancellor John Healey is expected to announce help with energy bills in this week's Budget. While any measures could benefit all households, it is more likely that the support will be targeted at those most in need. Campaigners are growing increasingly concerned given forecasts that the energy regulator Ofgem's price cap could surge by more 27% to almost £2,200 a year at the start of January.