Families on means-tested benefits will receive energy bill support if the Government decides to launch a targeted relief package this winter, The i Paper can reveal.
A system to target bill support has been drawn up that is restricted to benefit claimants because the Treasury currently has no way of targeting households purely based on income, insiders said.
In the spring, the then Chancellor Rachel Reeves said that any government action to help people deal with the impact on energy bills from the Iran war would be targeted at “those who need it most”. She subsequently said that the Government was “looking at ways in which we can support people based on their household income”.
The decision was aimed at learning from 2022, when a universal support package introduced by Liz Truss in response to the energy price fallout from Russia’s invasion of Ukraine ended up costing the taxpayer nearly £40bn.
While a system to differentiate families based on their total household income is seen as the “holy grail” and something which officials are still working towards, it is complicated to achieve and will not be ready this winter, The i Paper understands.
But the Treasury has a system that would allow support to be targeted at households receiving benefits, following a data-matching exercise overseen by Pensions minister Torsten Bell using information held by the Department for Work and Pensions.
“The infrastructure to deliver it [a targeted energy bill support scheme] is there,” a government source said.
The system can identify households receiving means-tested benefits, such as Universal Credit and Pension Credit
Andy Burnham and John Healey face a series of choices going into the autumn. The first is whether to intervene to provide further support with energy bills, and then whether it should be a targeted or universal offer.
The i Paper understands that one option would be to blend targeted support to low income families with some degree of universal relief.
A key consideration is the timing of when any package would be launched, with the day-to-day volatility in energy markets because of the Iran war making planning difficult.
Ofgem’s next price cap decision is due at the end of this month, and would set prices from October to the end of the year. The energy research firm Cornwall Insights is currently forecasting that the October price cap will be £1,699.59 per year – about 2 per cent higher than the current level.
A targeted support scheme would be intended as temporary, but the Government could also take a decision to cut money off everyone’s bills on a long-term basis.
If Burnham and Healey opted for this sort of universal measure, the main lever at their disposal would be transferring remaining green levies from bills to general taxation.
In April, Reeves transferred 75 per cent of the “renewables obligation” levy to taxation to cut bills by £150, and the Government could transfer the remaining 25 per cent too.
No 10 and the Treasury were contacted for comment.
In an interview with the Sunday Mirror, Burnham said that he was looking at cost of living support “across the piece” and indicated that he is interested in going further on energy bills.
Referring to the decision he took in his first week as Prime Minister to remove VAT from electricity bills – a move expected to reduce bills by £45 – he said: “It’s a short-term measure at this moment, but let’s see where we can go with that.”
He also said people had asked him to look at standing charges – the flat daily fee added to bills.
“We’ll keep monitoring that situation and make sure we’re doing everything that we can do,” he said. “People have raised issues like the standing charges on bills, and they kind of pushed me to go further on that.”
A government spokesperson said: “We’ve cut VAT on electricity to give families breathing space. This is alongside taking £150 off energy bills for years to come and expanding the Warm Home Discount to around six million households.
“The government is focused on working to bring down energy bills for good.”
Meanwhile, Healey used a column in The Sunday Telegraph to vow that he would stay vigilant for any sign of “price gouging” by supermarkets and petrol stations.
In a post on X, Burnham also endorsed an idea from the reality TV personality Tom Skinner that families should receive a “grow pack” to grow their own fruit and vegetables and save money on food bills.
“I like it, Tom,” he posted.
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