Chancellor faces £6bn challenge to expand energy support
Chancellor John Healey must find £6bn to expand energy support at the Budget and ensure every household is protected from anticipated price rises, reports BritPanorama.
The New Economics Foundation (NEF) – formerly run by energy secretary Miatta Fahnbulleh for six years – has urged Healey to make bill support reach as widely as possible as he considers which cost of living measures to announce on Wednesday.
Reports indicate that the chancellor is considering spending £1bn to boost an existing energy bill discount, which applies to those on certain means-tested benefits. Paid out annually, the Warm Home Discount currently grants a £150 rebate to qualifying households, with potential plans to increase this amount to as much as £300.
Last year, approximately six million households received the discount following an expansion in the scheme’s eligibility, which includes benefits such as universal credit, pension credit, and housing benefit. However, the NEF argues that many low-income households not receiving these benefits, along with middle-income households, will still face financial difficulty.
The think tank has proposed a “national energy guarantee” to cap a certain amount of essential energy for every household at late 2024 prices. This measure, researchers claim, would cut electricity bills by an average of 25 per cent and gas bills by 40 per cent starting in January.
When combined with the expanded Warm Home Discount, the plan could save households receiving benefits an average of £290 from January and £190 for all others. Implementing this package would cost £6bn, which the NEF suggests could be funded entirely through a windfall tax on banks or a commitment to reform capital gains tax.
Dr Alex Chapman, head of economic and environmental policy at NEF, stated: “Everybody should be able to have enough energy for the absolute essentials – to stay warm and keep the lights, the fridge and the washing machine on this winter.”
He further noted the broader impact of the ongoing US-Iran conflict on the UK energy market, stating: “But as households across the UK continue to pay the price… millions risk being forced to choose between heating and eating early next year.” Chapman stressed that providing a universal package of support for energy bills is vital to ensure no household is overlooked.
Following earlier measures, energy bills were reduced by £45 on average from October due to an announcement removing VAT costs from electricity bills. This was preceded by an average £150 reduction from April due to a decision to cut two green levies from bill costs. However, forecasters predict a sharp rise in energy costs in January, potentially nullifying these savings amid the ongoing global crisis.
Major energy provider EDF forecasts an increase in Ofgem’s energy price cap, potentially rising by £442 in the new year — a 25 per cent increase. A DESNZ spokesperson claimed, “To give families some breathing space, we cut VAT on electricity bills, on top of the £150 of costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.”
Looking ahead, the pressing demand for effective measures against surging energy costs remains a significant challenge for the government. The necessity for clear, decisive action will be critical as the winter months approach.
