Andy Burnham considers radical shake-up to cut energy bills

Created at 18 Jul · 9:06 AM2 sources↑ Market-relevant2 events

IN SHORT

UK Prime Minister Andy Burnham is reportedly examining proposals to reduce household energy bills by up to £130 annually by altering gas charging methods and shifting policy levies to general taxation. The plan aims to make electricity cheaper than gas, encouraging heat pump adoption.

Key Numbers

£189annual household energy bill cut proposed by Octopus Energy

£130annual savings from proposed reforms examined by Burnham

£3.2bnannual cost to taxpayer for proposed reforms

£2.7bnone-off cost to wipe out consumer electricity debts

2 millionhouseholds to benefit from debt relief

£29annual cost per household for unpaid bills

84%poorest households to see bill reduction

£22annual savings for poorest households from standing charge shift

£42annual savings from moving renewable energy levies to general taxation

£41annual savings from reducing VAT on electricity bills

£1,862average annual household energy bill cap in July

Who's Involved

Andy Burnham

New Labour leader considering energy bill reforms

Nesta

Thinktank examining radical energy bill proposals

Andrew Sissons

Director of Nesta’s sustainable future project

Ed Miliband

Energy secretary

Shabana Mahmood

Home secretary

Rachel Reeves

Chancellor who previously proposed similar measures

Liz Truss

Former Prime Minister who offered broad household support

Andy Burnham considers radical shake-up to cut energy bills

↳ Why This Matters

These potential reforms could significantly alleviate the cost of living pressures on UK households, particularly those struggling with energy costs and debt. By making clean energy options more financially attractive, the proposals also aim to accelerate the UK's transition to greener heating solutions and meet climate targets.

Key facts

Andy Burnham is considering plans to cut household energy bills by approximately £130 annually.
The proposed reforms involve changing how household gas is charged and removing policy levies from bills.
The aim is to make electricity cheaper than gas, encouraging the adoption of heat pumps.
The cost of the proposed package is estimated at £3.2 billion a year to the taxpayer.
Nesta, a thinktank, proposed wiping out consumer electricity debts at a one-off cost of £2.7 billion.
The standing charge on gas bills, which disproportionately affects low-income households, would be reformed.

Prime Minister Andy Burnham is reportedly considering significant reforms to the UK's energy market aimed at reducing household bills. Proposals being examined by his team, developed by the thinktank Nesta, could lower average annual bills by approximately £130. These changes would involve altering the way household gas is charged and shifting policy levies, such as those for renewable energy subsidies, from electricity bills to general taxation. This would make electricity cheaper relative to gas, incentivizing the adoption of cleaner heating solutions like heat pumps.

Nesta's plan also includes a one-off cost of £2.7 billion to eliminate the backlog of consumer electricity debts, which would save households an additional £29 annually. The reforms target the controversial standing charge on gas bills, which currently penalizes lower-income households, by shifting these grid maintenance costs to higher-income households that consume more gas. This shift is expected to save 84% of the poorest households around £22 per year.

Overall, Nesta calculates that the combined measures could save households about £130 annually, with further savings for those switching to electric alternatives. The proposals come as energy bills are expected to rise this winter due to global events, and follow similar measures proposed by former Chancellor Rachel Reeves. Burnham's team is expected to announce a cost-of-living package soon, with potential funding for these reforms to be addressed in the upcoming budget.

Frequently asked questions

Octopus Energy proposed reforming wholesale electricity pricing and shifting energy levies from electricity bills to general taxation to lower household bills.

Octopus Energy estimated reforms could save households up to £189 per year, while proposals being examined by Andy Burnham could save around £130 annually.

The reforms examined by Burnham's team are estimated to cost the taxpayer £3.2 billion a year, with an additional £2.7 billion one-off cost to clear consumer electricity debts.

Nesta's approach targets the controversial standing charge on gas bills by shifting these costs to higher-income households, which tend to use more gas, thus reducing the burden on low-income households.

What Happens Next

01Andy Burnham is expected to announce measures to tackle the cost of living upon entering Downing Street.

02The new chancellor's first budget this autumn will need to address the funding for any proposed package.

03Burnham's top team is expected to be announced on Monday.

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How It Developed

Octopus Energy proposed reforms to cut household energy bills by £189 annually.

Andy Burnham is considering radical plans that could cut household energy bills by £130 a year.

The proposal would change the way household gas is charged and remove some policy levies from bills.

Making electricity cheaper relative to gas would make running heat pumps a more attractive option.

The government can deliver around £130 a year in immediate financial relief for the majority of UK households.

Nesta argued the government should also wipe out the backlog of consumer electricity debts.

The costs of any package would have to be met in the new chancellor’s first budget this autumn.

Nesta’s approach targets the controversial standing charge on gas bills.

Sources

Andy Burnham considers radical shake-up to cut energy billsThe Guardian

Octopus tells Burnham to ‘cut bills’ with £189 energy planCity AM