Tax the banks to save households £290 on energy bills at Budget, Healey urged

Chancellor John Healey must find £6bn to expand energy support at the Budget and ensure every household is protected from anticipated price rises, an influential think tank has said.

The New Economics Foundation (NEF) – formerly run by energy secretary Miatta Fahnbulleh for six years – has urged John Healey to make bill support reach as widely as possible as he considers which cost of living measures to announce on Wednesday.

The chancellor is reportedly considering spending £1bn to boost an existing energy bill discount which applies to those on certain means-tested benefits.

Paid out every year, the Warm Home Discount currently grants a £150 rebate to qualifying households. This figure could be boosted to as much as £300, reports indicate.

As many as six million households received the discount last year after the government expanded eligibility for the scheme last year, with qualifying benefits including universal credit, pension credit and housing benefit.

However, the NEF has urged Mr Healey to go further than this, arguing that millions of low-income households not in receipt of benefits – alongside middle-income households – will still struggle.

The think tank has recommended a “national energy guarantee” to cap a block of essential energy for every household at late 2024 prices. This would cut the cost of energy bills by an average 25 per cent for electricity and 40 per cent for gas from January, researchers say.

Paired with the expanded Warm Home Discount, the measure could save an average £290 for households receiving benefits from January, and £190 for all others.

The package would come at a cost of £6bn to the Treasury, which the NEF says could be paid for entirely through a windfall tax on banks or a commitment to reform capital gains tax.

Dr Alex Chapman, head of economic and environmental policy at NEF, said: “Everybody should be able to have enough energy for the absolute essentials – to stay warm and keep the lights, the fridge and the washing machine on this winter.

“But as households across the UK continue to pay the price for the US war with Iran and our reliance on global fossil fuels, millions once again risk being forced to choose between heating and eating early next year.

“Providing a universal package of support for energy bills this winter is the only way the government can guarantee that every household needing support will receive it and ensure no one is left behind.”

Energy bills were reduced by £45 on average from October following an early announcement by Andy Burnham to remove VAT costs from electricity bills. This followed an average £150 reduction from April through Rachel Reeves’ decision to cut two green levies from bill costs.

But forecasters have predicted a major rise in January that could virtually wipe out the savings from these initiatives as the US-Iran conflict continues to hit energy costs worldwide.

Major energy provider EDF is predicting an increase to Ofgem’s energy price cap of as much as £442 in the new year – a 25 per cent rise.

A DESNZ spokesperson said: “To give families some breathing space, we cut VAT on electricity bills from October, on top of the £150 of costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.

“By delivering more homegrown power we control, with nuclear, solar and wind power, we are building resilience for the country and financial security for communities, families and businesses.”