The incoming Labour leader is examining proposals that would restructure how household energy bills are charged, potentially delivering significant savings for consumers while accelerating the adoption of cleaner heating technologies.
The plan, developed by the thinktank Nesta and currently under review by Burnham’s team, would eliminate certain policy costs from electricity bills and reform gas standing charges. Standing charges, which cover grid maintenance and meter costs regardless of consumption, would be redistributed into overall pricing structures. This approach would shift a larger portion of grid costs to higher-income households that typically consume more gas, while benefiting lower-income households and those in fuel poverty. According to Nesta’s analysis, such changes would reduce bills for 84% of the poorest households by approximately £22 annually.
The proposal incorporates several complementary measures aimed at lowering electricity costs. Moving renewable energy subsidies from household bills into general taxation would save consumers £42 yearly, while reducing VAT on electricity bills would provide an additional £41 in savings. Together, these changes would make electric heat pumps more economically competitive with traditional gas boilers, encouraging household adoption of alternative heating systems.
Additionally, the proposal recommends clearing the substantial backlog of consumer electricity debt at a one-time cost of £3.7bn, which would provide relief to approximately 2 million households and reduce the £29 annual charge all households currently pay to cover unpaid bills. The total package would require funding through the new chancellor’s budget later this year, potentially necessitating tax increases or revenue reallocation.
Burnham included cost-of-living relief in his recent speech as the new party leader, pledging to address the price of essentials. The timing of these announcements comes as household energy bills are anticipated to rise following geopolitical tensions affecting global oil and gas prices.
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