Energy secretary pushes Healey for more Budget support on rising bills

Energy secretary Miatta Fahnbulleh is fighting to persuade chancellor John Healey to cut renewable levies from bills to try to bring down costs for all households, not just the most vulnerable, ahead of a New Year price rise.

Healey is determined to keep down the cost of any help on energy costs in the Budget later this month by limiting it to the poorest households, increasing the "Warm Homes Discount" for those on benefits from £150 to £250 at a cost of about £600mn.

This targeted support would apply to 6mn out of 29mn households in the UK.

The chancellor has already provided help with energy bills through the current six-month scrapping of VAT on electricity, saving an average of £45 per household.

But some ministers are nervous that this is not enough given the big jump in energy bills set to hit households in the new year. "We are still discussing a range of options," said one government figure.

Cornwall Insight forecasts that Britain's energy price cap will rise by 16 per cent for the January to March period, with typical households paying £1,999.28 per year, largely owing to higher wholesale gas prices caused by the US-Iran war.

Fahnbulleh is making a last-ditch Budget pitch to the chancellor to remove levies relating to existing renewable energy projects from bills and switch the cost to general taxation.

A year ago former chancellor Rachel Reeves knocked £150 off bills by removing 75 per cent of the cost of Renewables Obligation Certificates (ROCs), a historic subsidy, for three years while scrapping an efficiency scheme called the Energy Company Obligation.

Now Fahnbulleh wants to shift the remaining 25 per cent of ROCs away from household bills, as well as levies to pay for "feed-in tariffs" -- another old renewables subsidy.

One proponent of the idea said that keeping energy bills in check would help rein in inflation.

Energy UK, the industry trade group, has also called for the government to remove levies from electricity bills, as well as introduce more support for vulnerable homes and those in energy debt and arrears -- which have reached a record of more than £5bn.

The forecast January price cap is approaching the level per unit of energy at which the government capped bills in October 2022, when wholesale prices soared following Russia's invasion of Ukraine.

One industry executive said there was "nervousness" in the sector over how the winter might play out given the consumer energy debt levels and limited scope for government support. "There is less fat in the [global] system to cope with continued shortage of supplies," they added.

However, another noted that El Niño is expected to bring warmer winter temperatures, reducing the amount of gas needed for heating.

There is also some long-term discussion within the energy department about the idea of introducing a "rising block tariff" in which the tariffs paid by consumers would depend on consumption levels rather than income. Consumers would pay less for "essential" use and more per unit beyond a set point.

Fahnbulleh used to run the New Economics Foundation, a think-tank which has proposed the idea.

Many in the industry say introducing a rising-block tariff could be problematic at a time when the government is trying to encourage people to shift to electric cars and electric heating, which will require greater use of expensive electricity.

DESNZ declined to comment.

The Treasury said: "Decisions on tax are a matter for the Chancellor to set out at fiscal events . . . Both departments remain in lockstep on delivering the Government's priorities, including giving families and businesses breathing space, backing British jobs and driving growth, underpinned by a commitment to meet the fiscal rules."