Here’s how much UK households could save on energy bills under a new discount plan
Key Points
- A £2 billion targeted energy discount scheme would save eligible UK households an average of £175, the Resolution Foundation says.
- Support would go to households on means-tested benefits plus those with a highest earner on under £24,000 a year — around 40% of all households.
- A tiered option would pay around £220 below £18,000 of income and £85 between £18,000 and £24,000.
- Lower-income areas cut gas use 15% more than richer areas in the 2022 price spike, and only one-sixth of that fall had reversed by 2024.
- The foundation wants a scheme ready to switch on by January 2027, with automatic enrolment via HMRC data for future crises.
A targeted energy discount scheme costing £2 billion would save eligible UK households an average of £175 and cushion the impact of further gas price shocks this winter, according to Resolution Foundation research published on Monday (10 August).
The think tank said the Government will need to move quickly to have a scheme running by January 2027. Its report, Billing me softly, argues that further escalation of the war in Iran makes higher energy bills over the winter a growing possibility, just as temperatures fall and household gas use rises.
It credits the Prime Minister’s day-one VAT cut on electricity bills but says a fresh universal support package would cost more than the Government can afford and would hand the largest benefit to richer households.
Under the proposal, eligible households would receive a temporary discount applied to their gas and electricity unit prices. Support would go beyond those on means-tested benefits to include households passing an income test assessed on the highest-income individual.
A threshold of £24,000 a year would cover around 40% of all households and reach 83% of those in the poorest fifth of the population.
A tiered version would pay around £220 to households with incomes below £18,000 and £85 to those between £18,000 and £24,000, at the cost of extra complexity.
The authors accept the design would create rough justice for some single-earner households just above the threshold, most likely working-age couples with children, and suggest a more generous threshold for households with children as a fix.
Why a benefits-only scheme falls short
Passporting support solely to means-tested benefit recipients is administratively simple but reaches only a quarter of British households and misses most below-average-income households, the foundation said.
Hardship extends further up the income scale: in 2022-23, 15% of households in the second income quartile said they could not afford to keep their home warm.
Separate Resolution Foundation analysis published the same day, Losing Energy by Zachary Leather and Amber Rajham, found that lower-income areas cut their gas use by 15% more than higher-income areas when prices spiked in 2022 after the invasion of Ukraine.
Two years later, only one-sixth of that fall had reversed, indicating those households are still heating their homes less than is comfortable.
The foundation also urged the Government to build a more robust scheme for future crises, including automatic enrolment using HMRC data rather than self-declaration.
“The last energy crisis pushed families in the poorest places to cut their heating by more than those in the richest, with most still not warming their homes as much as they used to – and a fresh price spike this winter risks driving them lower still,” said Jonathan Marshall, Principal Economist at the Resolution Foundation.
“Successive governments have failed to build a robust system for dealing with household energy prices. But with ongoing uncertainty in the Middle East meaning there is still considerably volatility in energy markets, the government must act now to have a targeted scheme ready to switch on by January 2027, so that support reaches struggling families quickly when they need it most.”
