Experts fear that another increase to energy bills could come in October
Ministers should introduce a targeted scheme to cut energy bills for households struggling over winter, an influential think tank has said.
Around 40 per cent of households could receive an average £175 through the proposals put forward by the Resolution Foundation, at a cost of £2bn to the government.
Researchers say the scheme should be means-tested based on income and made available to households where the highest earner makes less than £24,000 per year, urging ministers to “act fast” to get ahead of further price rises.
It would follow from prime minister Andy Burnham’s move to cut an average £45 a year from energy bills by removing VAT costs.
Sir Keir Starmer’s government also announced a reduction of £150 on average to bills at last year’s budget through the scrapping of two energy efficiency schemes, beginning in April 2026.
These measures combined will cut energy bills by £200 on average from October. But spiking energy costs arising from the US-Iran war mean these savings are likely to be entirely cancelled out.
Ofgem’s energy price cap rose by £221 a year in July to £1,862 – the highest level in two years. The energy regulator will announce the level for October to December in late August.
Experts fear that another rise is likely for over these winter months, as energy bill pressures approach a similar point to the situation seen after Russia’s invasion of Ukraine in 2022.
The government spent £44bn during the consequent energy crisis on a support scheme that was universal, meaning households of any income level benefitted from the same level of support.
The Resolution report finds that households in the poorest areas cut back on their energy use 15 per cent more than in wealthier areas during the scheme’s duration, pointing to a need for more concentrated support in the wake of a new crisis.
Jonathan Marshall, principal economist at the Resolution Foundation, said: “The last energy crisis pushed families in the poorest places to cut their heating by more than those in the richest, with most still not warming their homes as much as they used to – and a fresh price spike this winter risks driving them lower still.
“The government can get ahead of this, if it acts now. A targeted energy discount could save eligible households £175 a year and reach over four-fifths of the poorest families, while expanding support beyond just those on means-tested benefits.”
The targeted support must be “switched on” by January 2027 to mitigate the impacts of rising costs, Mr Marshall added.
The income-based test of the proposed scheme would distinguish it from other support measures in place. The current Warm Home Discount, which provides support for lower-income and vulnerable households, is instead based on certain benefit eligibility.
This discount scheme will be extended until at least the end of the decade, the government confirmed last year, in a move welcomed by campaigners. However, experts have warned that high levels of under-claiming for the qualifying benefits also means millions who would likely be eligible don’t benefit from the scheme.
A Department for Energy Security and Net Zero spokesperson said: “The energy secretary’s priority is bringing bills down for good.
“We will tackle the cost of living to make life’s essentials affordable again and bring back hope.”
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