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Last Updated: Monday, 3 March 2008, 18:42 GMT
UK mulling fuel poverty voucher
Thermal image of a gas hob
Energy companies are facing calls for a windfall tax on profits
The government is considering a voucher scheme to help the poorest people pay their gas and electricity bills, the BBC has learned.

Treasury ministers raised the idea in a meeting with executives from some of the biggest UK energy firms on Monday.

Energy firms have been criticised for raising gas and power prices when they are seeing their profits increase.

More than four million UK households are fuel poor - spending more than 10% of their income on energy bills.

The Treasury declined to comment on the content of the meetings.

However, more details are expected on Tuesday, when the Treasury will ask the companies to comment on the proposals in time for the Budget on 12 March.

'Substantial programme'

An industry executive criticised the possible plan, saying a scheme that relied on vouchers was a "soup kitchen solution" that would not help those that most needed it.

Energy company sources said no details of the possible scheme were discussed on Monday.

Unless energy companies are prepared to take genuine action...the government must take tough action and levy a windfall tax
Dougie Rooney, Unite union

They said that the Treasury did not unveil how the vouchers would work, who would qualify for them, nor how much the firms would be expected to put into the scheme.

There is concern that the vouchers, which people would use to help pay their gas and electricity bills, were an "antiquated" solution that would be "potentially demeaning for those in genuine need", an executive told the BBC.

A Treasury spokesperson said he could not comment on speculation about the Budget.

However, he added in a statement: "The government has committed to a substantial programme to alleviate fuel poverty, including 2.3bn for energy efficiency in low-income households over the next three years."

National Energy Action, which helps people on low incomes, said it was keen to see further details.

"We would welcome proposals to extend financial help to vulnerable groups such as families with young children and people with disabilities, " communications director Maria Wardrobe said.

Currently, only people over the age of 60 receive support under the government's winter fuel payments scheme.

Former energy minister Brian Wilson agreed that a more wide-ranging programme was needed.

"The important thing is there is a recognition that something that is comprehensive, rather than the myriad of schemes that benefit relatively few people, is necessary," he told the BBC.

'Genuine action'

Some of the UK's main energy firms, including Centrica, owners of British Gas and E.On, formerly Powergen, have been meeting ministers ahead of next week's Budget.

Electricity bill
They are not social services departments. Neither are they entirely uncaring.
David Porter, Association of Electricity Producers

Both sides have been coming under pressure to find a solution to tackle fuel poverty since British Gas revealed a large increase in profits - to 571m - shortly after increasing gas and electricity bills by 15%.

The Unite union on Monday renewed its calls for the Chancellor to announce a windfall tax on energy company profits in his Budget next week.

"The price increases that energy companies are imposing on their customers are plunging hundreds of thousands of new households into fuel poverty," Unite's Dougie Rooney said.

"Unless energy companies are prepared to take genuine action to help the 4.5 million people living in fuel poverty the government must take tough action and levy a windfall tax," he said.

Fighting back

The energy industry has reacted angrily to suggestions of a compulsory tax or levy on its profits.

"It is very damaging to dive in and suddenly impose huge unexpected taxes on companies that you expect to build 30bn of new infrastructure we need so badly," David Porter, chief executive of the Association of Electricity Producers said.

"They are not social services departments. Neither are they entirely uncaring," he said.

An energy company source told the BBC that the government itself should do more to help the poorest consumers.

"The government wants an increased contribution to fuel poverty, but it works both ways," the BBC was told.

"The government takes hundreds of millions of pounds more in value-added-tax on domestic fuel than it puts into helping the fuel poor."

According to the company source, the government took 1bn in tax on domestic fuel during the 2006-7 financial year, and intended to spend 350m in 2007-8 to help the poorest bill payers.

A Treasury spokesperson said the European Union sets minimum rates for value-added-tax on domestic fuel and it currently uses the lowest allowable rate of 5%.

It is understood to favour an industry solution to help alleviate fuel poverty to prevent the need for a compulsory tax.

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