The UK is on the cusp of a radical overhaul of its energy policy, with Labour leader Andy Burnham set to unveil plans that could cut household energy bills by £130 annually. The proposed shake-up, led by think tank Nesta and currently under review by Mr Burnham's team, aims to address the long-standing anomaly in which electricity costs more than gas, making cleaner heating options prohibitively expensive for many households.
The comprehensive strategy, set to be a key component of Mr Burnham's initial policy announcements following his election as party leader last Friday, seeks to reform the structure of household gas charges and reevaluate policy levies. By shifting certain costs from household bills into general taxation and reducing VAT on electricity, the proposals aim to make clean heating technologies more financially attractive and accelerate their adoption across the UK.
A key plank of the reforms is the proposed abolition of the fixed daily gas standing charge, which currently adds a flat fee to bills regardless of usage. This measure would see higher-income households, who typically consume more gas, bear a greater share of grid maintenance expenses, with 84% of the poorest households saving an average of £22 per year.
The package also recommends moving existing levies that fund renewable energy subsidies from household bills into general taxation, which could reduce electricity costs by £42 annually. A reduction in VAT on electricity bills is also proposed, potentially saving consumers an additional £41 a year. These combined measures are estimated to deliver the £130 yearly saving.
The proposals also include a recommendation for the government to clear the existing backlog of consumer electricity debts, an initiative estimated to cost £2.7 billion as a one-off expense. This bailout would not only provide relief to approximately two million households but also reduce the £29 annual charge currently borne by all households to cover the costs of unpaid bills.