The Resolution Foundation has called on Prime Minister Andy Burnham to introduce a £175 energy bill discount for households where the top earner takes home £24,000 a year or less, as part of an emergency winter plan to tackle rising fuel costs.
Proposal targets 40% of households
The thinktank's report, published today, recommends the government implement a scheme that would cut annual bills by up to £175 for poorer consumers, at a cost of £2 billion to the taxpayer. Support would be restricted to households where the highest earner earns £24,000 or less annually, reaching approximately 40% of all households and covering 75% of those in the poorest four income deciles.
The report suggests the discount could be tiered, paying around £220 to households with incomes below £18,000 and £85 to those earning between £18,000 and £24,000. It notes that automatic enrolment via HMRC data should be the long-term goal, but for this winter, self-declaration verified by HMRC after the fact is "imperfect but deliverable."
Pressure mounts amid rising wholesale prices
The call comes after Burnham's first policy announcement as prime minister was to temporarily remove VAT from electricity bills, saving households about £45 a year. However, the policy initially had confirmed funding for just six months. With wholesale gas prices rising following the resumption of hostilities in the Middle East, the thinktank warns that costs are likely to increase through the winter.
The report states: "Our new Prime Minister has a full in-tray, but the cost of living is certain to be near the top. When campaigning to be the Labour leader, he said that 'Britain is paying too much for the basics' and has already announced a 6-month zero-rating of VAT on electricity bills to give households some 'breathing space'."
Expert calls for action now
Jonathan Marshall, principal economist at the foundation and co-author of the report, said: "The government can get ahead of this, if it acts now. A targeted energy discount could save eligible households £175 a year and reach more than four-fifths of the poorest families, while expanding support beyond just those on means-tested benefits."
He suggested ministers should have a plan ready to be "switched on" in January next year, when the quarterly energy cap is adjusted. The scheme could offer either a flat rate £175 discount or additional help to the lowest-income households.
Energy debt crisis hits vulnerable groups hardest
The report also highlights new analysis showing that single-parent families, disabled households, and Black families are bearing the brunt of the UK's energy debt crisis. The analysis, by Ana Castro and Jonathan Bradshaw at the University of York, draws on the Family Resources Survey 2024/25, which found that 3.9% of households (around 1.1 million) had fallen behind on gas, electricity, or other fuel bills over the previous 12 months.
Arrears ran at 14.3% among single-parent families, more than three times the national rate. The figures show 9.5% of Black, African, Caribbean, and Black British households were behind, as were 6.6% of families with a disabled member, compared to just 1.9% where no one is disabled. Families with children were also far more likely to be in arrears than households without.
Campaigners demand windfall tax
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: "This new analysis lays bare who is paying the price for our broken energy system and should remind policy makers and regulators that this is a can't-pay crisis, not a won't-pay one.
"And this is a picture from last year. The number of households under strain is growing, not shrinking as the price shock profiteers extracting and selling the gas that drives our bills continue to post billions in profit.
"What's worse, Citizens Advice recently found that network companies have been handed a £5 billion windfall by the very inflation that pushed families into debt.
"The long-promised energy debt relief scheme must now be brought forward and funded through energy company windfall profits, not added to consumer bills. The firms handed billions by this crisis should be first in line to help clear the debt mountain it created."
Government response and future plans
The government spent £44 billion during the 2022 energy crisis on subsidising bills for all households, including the wealthiest. The foundation's report shows that households in the poorest areas cut back on their energy use by 15% more than those in wealthier postcodes over that period. Only one-sixth of this fall in consumption had been reversed, suggesting that these households are still heating their homes less than is comfortable.
A spokesperson for the Department for Energy Security and Net Zero said: "The energy secretary's focus is bringing bills down for good. We will tackle the cost of living to make life's essentials affordable again and bring back hope."
The chancellor, John Healey, has said tackling the cost of living would be a priority ahead of his first budget, scheduled for October 25.
