A prominent campaign group has called on Andy Burnham to introduce a £175 payment for all households where the main earner earns £24,000 or less annually. The Resolution Foundation has urged Labour to develop an emergency strategy to reduce energy costs for low-income families.
This appeal follows Burnham’s initial policy move as prime minister to temporarily remove VAT from electricity bills, which provided households with an approximate yearly saving of £45. However, the policy was initially funded to last only six months.
With wholesale gas prices increasing amid renewed tensions in the Middle East, the thinktank warns that energy costs are expected to climb during the winter months. The Resolution Foundation’s recent report proposes a programme that could reduce annual energy bills by up to £175 for lower-income consumers, at an estimated cost of £2 billion to taxpayers. Support would be limited to households where the highest earner makes £24,000 or less per year.
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The proposal aims to assist around 40% of households, making it more generous-but potentially more challenging to administer-than schemes targeting only those receiving means-tested benefits.
The report states: “To balance effective targeting with practical implementation, we recommend extending support to households passing an income test based on the highest resident earner. Setting the threshold at £24,000 per year would cover roughly 40% of households and include 75% of those in the lowest four income deciles. This £2 billion initiative could provide an average payment of £175 per eligible household or be tiered-paying approximately £220 to those earning below £18,000 and £85 to those above-to prioritise the poorest. Automatic enrolment via HMRC data should be the preferred approach; for immediate winter needs, self-declaration with post-verification by HMRC is a feasible alternative.”
Jonathan Marshall, principal economist at the Resolution Foundation and co-author of the report, emphasised the urgency of prompt government action. He stated: “The government can take proactive steps now. A targeted energy discount could save eligible households £175 annually and assist over 80% of the poorest families, extending support beyond solely those receiving means-tested benefits.”
Marshall suggested that ministers prepare an aid plan ready to be implemented in January, coinciding with the quarterly energy price cap review. This support could take the form of a flat £175 discount or provide additional assistance to the lowest-income households.
Recent research by Ana Castro and Jonathan Bradshaw at the University of York, analysing the latest Family Resources Survey 2024/25, highlights that single-parent families, disabled households, and Black families are disproportionately affected by the UK’s energy debt crisis. The survey reveals that 3.9% of households-around 1.1 million-fell behind on fuel payments in the past year.
Arrears were reported at 14.3% among single-parent families, more than triple the national average. Additionally, 9.5% of Black, African, Caribbean, and Black British households and 6.6% of households with a disabled member were in arrears, compared to just 1.9% in households without a disabled person. Families with children were also significantly more likely to be behind on payments than childless households.
Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “This new analysis exposes those bearing the harshest consequences of our flawed energy system and reminds policymakers and regulators this is a can’t-pay crisis, not a won’t-pay one. The situation is worsening, despite energy price profiteers continuing to earn billions. Furthermore, Citizens Advice recently revealed network companies have received a £5 billion windfall due to inflation, exacerbating families’ struggles. The long-promised energy debt relief scheme must be introduced promptly, funded by energy company windfall profits rather than adding to consumer bills. Those benefiting from this crisis should be first to assist with the mounting debt.”
During the 2022 energy crisis, the government spent £44 billion subsidising bills for all households, including the wealthiest. The Resolution Foundation’s report shows that households in poorer areas reduced energy consumption by 15% more than those in affluent districts during this period. Only a fraction of this reduction has been reversed, indicating that many are still heating their homes below comfortable levels.
A spokesperson from the Department for Energy Security and Net Zero stated: “The energy secretary’s priority is to ensure bills come down sustainably. We are committed to addressing the cost of living so that essentials become affordable and hope is restored.”
Chancellor John Healey has affirmed that tackling the cost of living will be a key focus in his upcoming budget, scheduled for 25 October.