- £3.7bn plan could cut bills for low-income households.
- Energy prices may rise by 10 per cent after July.
- Broad subsidies warned to favour richer households.
The UK government is facing fresh calls to introduce an energy social tariff, with proposals suggesting up to £3.7bn in targeted support for low-income households as energy bills and cost of living pressures remain in focus.
A report from the Resolution Foundation argues that a discounted energy tariff could help shield the most vulnerable from rising costs, particularly as global tensions linked to the Iran conflict continue to unsettle oil and gas markets. The thinktank suggests the scheme could be in place before next winter, offering more focused support than broader, system-wide interventions.
The proposal comes as concerns grow over a possible rise in household energy bills, with analysts warning that the Ofgem price cap could increase by around 10 per cent after July, adding roughly £160 a year to the average bill.
Targeted help instead of blanket support
The Resolution Foundation suggests a social tariff could provide an average £310 a year to the poorest tenth of households, rising to about £520 for families with higher energy needs. The plan would apply a 21 per cent discount on gas and electricity for households earning below £38,000 before housing costs.
The thinktank cautioned that blanket support measures, similar to the energy price guarantee introduced after the Russia-Ukraine conflict, could prove costly and less effective. It reportedly described such approaches as “wasteful” or at risk of missing those most in need.
There are also wider fiscal concerns. With government borrowing and debt already elevated, targeted support is being positioned as a more cost-effective option compared to large-scale subsidies.
At the same time, political pressure is building. Opposition parties including the Conservatives, Reform UK and the Liberal Democrats are pushing for the government to reconsider a planned fuel duty increase from September. A temporary 5p cut on petrol and diesel is set to be phased out then.
Reform UK has also proposed scrapping VAT and remaining green levies on energy bills. VAT currently stands at 5 per cent. However, the Resolution Foundation warned that removing policy costs entirely could disproportionately benefit higher-income households, who tend to consume more energy.
Bills steady for now, but pressure building
Household energy bills are currently capped until July under Ofgem’s price cap, offering short-term stability. Some households on fixed tariffs may be protected for longer, but forecasts suggest the next revision could push costs higher.
Chancellor Rachel Reeves reportedly said the government is reviewing options for targeted support, noting that preparatory work carried out during the earlier energy crisis has put officials in a stronger position. However, she indicated it is still too early to outline specific measures or scenarios.
One challenge remains data. Previous proposals for an energy social tariff have struggled due to gaps in reliable information on household incomes and energy usage, which are needed to target support effectively.
If a full scheme cannot be introduced in time, the Resolution Foundation suggested interim measures such as removing some policy costs or increasing universal credit payments. However, it described these as a “poor substitute” compared to a dedicated tariff.
Meanwhile, financial strain is already visible. Research from Age UK found that 28 per cent of pensioners were struggling financially even before the recent escalation in Middle East tensions, with energy costs cited as a major concern.
With global energy markets still reacting to geopolitical risks, the direction of travel for household bills remains uncertain, leaving policymakers balancing urgency with affordability.
