New hydrogen levy is ‘harmful’ and could stoke inflation, Tory MPs warn
Plans for a new tax on energy bills to fund research into hydrogen have been opposed by senior Tory MPs arguing it would be “harmful” and make inflation worse.
The Energy Bill, which would be the first piece of legislation from Rishi Sunak’s new Department for Energy Security and Net Zero (DESNZ) would see an additional levy added to household energy bills from 2025, to fund production of hydrogen as a low-carbon fuel.
But energy secretary Grant Shapps could be facing a rebellion among Conservative MPs unwilling to support the policy.
It comes just weeks after the PM laid out his five pledges, including halving inflation – a key policy commitment opponents fear could be at risk from a new tax.
Former business secretary Jacob Rees told City PM he was “against new taxes even when they masquerade as green levies”.
The MP for North East Somerset added: “Any new impost is inflationary. The economy needs cheap energy so this will be harmful.”
And Rees Mogg suggested the split over hydrogen funding revealed tensions between the needs of businesses and policies to support climate goals, following Sunak’s Whitehall rejig.
“My concern is that a solo energy ministry will zealously ignore the needs of business rather than have a sensible transition to net zero,” he said.
Colm Britchfield, policy advisor at climate change think tank E3G, said “likely users” of hydrogen would be industrial and not households.
“We think it’s unfair for domestic consumers to be taxed to subsidise it,” he continued. “We’re not saying the government shouldn’t support hydrogen if it wants to but there’s no reason consumers should pay for it.”
Northampton South MP Andrew Lewer told the Telegraph: “Just as it looks like bills will maybe start to come down, that will put them up again.”
Energy bills have more than doubled since 2021, despite the government’s efforts to support households with higher costs, sparked in part by fallout from Russia’s invasion of Ukraine.
Hydrogen can be made in several ways but the only zero carbon method, known as green hydrogen, is produced using zero carbon electricity, through electrolysis.
DESNZ has been contacted for comment.