Campaigners have called on Andy Burnham to implement a £175 payment for all households where the highest earner makes £24,000 annually or less. The Resolution Foundation has urged the Labour leadership to prepare an emergency plan to reduce energy costs for low-income families amid rising fuel prices.
This appeal follows the prime minister’s initial policy of temporarily removing VAT from electricity bills, aimed at saving households approximately £45 per year. However, this policy was originally funded for only six months.
With wholesale gas prices increasing due to renewed conflict in the Middle East, the Resolution Foundation warns that energy costs are likely to rise further throughout the winter. The thinktank recommends a scheme costing £2 billion annually to reduce bills by up to £175 for poorer consumers. Support would be targeted at households where the top earner takes home no more than £24,000 a year.
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Covering around 40% of households-including 75% of those in the poorest 40%-the proposal is designed to be more generous than schemes limited solely to those receiving means-tested benefits, though it may be more complex to implement.
The report states: “To balance effective targeting and practical delivery, we propose extending support to households passing an income test based on the highest income among residents. A £24,000 threshold would include about 40% of households and cover the majority of the poorest four income deciles. A £2 billion scheme could provide an average £175 per eligible household, possibly tiered to offer approximately £220 for incomes below £18,000 and £85 for those above, prioritising the poorest. Automatic enrolment via HMRC data should be the goal; for this winter, self-declaration verified by HMRC post-implementation is imperfect but feasible.”
Jonathan Marshall, principal economist at the foundation and co-author of the report, said, “The government can get ahead of this by acting now. A targeted energy discount could save eligible households £175 a year, covering over 80% of the poorest families, while expanding support beyond those on means-tested benefits.”
He suggested that ministers prepare a scheme to be activated in January, aligned with the quarterly energy price cap adjustment. This could either be a flat-rate £175 discount or include additional support for the lowest-income households.
Recent analysis from the University of York highlights that single-parent families, households with disabled members, and Black families are most affected by the UK’s energy debt crisis. Drawing on the 2024/25 Family Resources Survey, the study found that 3.9% of households-about 1.1 million-had fallen behind on fuel payments in the previous 12 months.
The rates of arrears were notably higher among single-parent families (14.3%), Black, African, Caribbean, and Black British households (9.5%), and families with a disabled member (6.6%), compared with 1.9% in households without disabled members. Families with children were also disproportionately affected.
Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “This analysis exposes who bears the cost of our broken energy system, emphasising this is a can’t-pay crisis, not a won’t-pay one. The number of struggling households is growing as companies exploiting the crisis continue to make billions in profits. Moreover, network companies have received a £5 billion windfall due to inflation that pushed families into debt. The promised energy debt relief scheme must be brought forward and funded through these windfall profits, rather than by adding to consumer bills.”
During the 2022 energy crisis, the government spent £44 billion subsidising bills for all households, including the wealthiest. The Resolution Foundation’s report reveals that households in the poorest areas reduced energy use by 15% more than those in wealthier areas during this period, with only a fraction of this reduction reversed, suggesting ongoing discomfort.
A spokesperson for the Department for Energy Security and Net Zero emphasised: “The energy secretary is focused on bringing bills down sustainably. We will tackle the cost of living to ensure essentials are affordable and restore hope.”
Chancellor John Healey has indicated that tackling the cost of living will be a priority in his first Budget, scheduled for 25 October.