Andy Burnham has his sights set on cutting household costs if he moves into Downing Street later this month.
Burham, who will likely be confirmed as Labour leader once nominations close, with a special conference on Friday, 17 July, made it clear he wants to focus on cost of living with new policies within his first few weeks.
He told Andrew Marr on LBC: “Britain is paying too much for the basics. People are paying too much, but businesses are also paying too much, and that is certainly true of energy.
“Britain needs more breathing space … We do need to be serious about putting more money back into people’s pockets.”
Following the US-Israel war with Iran, the energy price cap rose on 1 July pushing prices up by 13 per cent for a typical household, which use electricity and gas and pay by Direct Debit, seeing annual bills rise by around £221 to £1,663. There is concern bills could go up again in the autumn with the war in Iran still ongoing.
Energy bills are in the former-Manchester Mayor’s sights within his first 100 days, and he may propose a plan inspired by systems used by countries in Asia.
Andy Burnham wants to tackle the cost of living crisis (Photo: Dan Kitwood/Getty)What is an affordable energy guarantee?
Burnham’s team is understood to be considering an affordable energy guarantee put forward by think-tank the Joseph Rowntree Foundation (JRF), which would provide a set portion of cheaper energy designed to cover a typical household’s basic energy use.
The Daily Telegraph reported that former energy minister Miatta Fahnbulleh, who is helping Burnham develop his energy plan, is a fan of the idea, which could cost £7bn.
The JRF writes the discount must be universal as households from all backgrounds are experiencing energy hardship, with different thresholds in place for different incomes .
The reported proposal could save the average middle-income household around £225 a year, and the poorest £270. However, it would also boost the richest by £179.
The JRF proposal reads: “In our proposal, all households would receive a unit rate discount on energy beneath a threshold. Any energy that is consumed above that threshold would be charged at the current market rate.
“The standard, universal threshold for discounted energy could be set at 50 per cent of typical consumption based on Ofgem domestic consumption values. But this threshold would also vary upwards in response to means and needs.”
People across the UK are feeling the pinch (Photo: Daniel LEAL / AFP) (Photo by DANIEL LEAL/AFP/Getty)How have other countries inspired the policy?
Versions of this model are used in several countries, including Japan, South Korea and India.
In May, Japan announced that they would be responding to rising fuel costs by subsidising energy bills.
Support will be provided in summer when electricity consumption is highest because of air conditioning. Households will get ¥3.5 per kilowatt-hour in July and September and ¥4.50 per kilowatt-hour in August. The plan will cost around ¥500bn, or £2.3bn.
Earlier this year South Korea also proposed a supplementary government budget of £12.9bn to support consumers and companies hit by the war in the Middle East.
“Beyond economic data, difficulties and anxiety felt by our people and companies are deepening more than ever,” said budget minister Park Hong-keun. “A pre-emptive response is more important than anything else.”
This allocated £2.4bn to provide financial support in the form of consumer vouchers, excluding those in the top 30 per cent nationwide by income.
India also subsidises energy, with electricity consumption subsidies reaching £20.89bn in the 2025 fiscal year, and gas subsidies reaching £6.2bn.
The International Institute for Sustainable Development says that in India: “Electricity subsidies are aimed at largely benefiting domestic and agricultural consumers.”
Principal Policy Advisor for the JRF Darrren Baxter says they looked at these models, telling The i Paper: “The concept this is based on is the idea of a rising block tariff and that is what is often implemented in other countries.
“In most examples though, the higher blocks pay higher rates, which funds the lower income brackets. We felt this wouldn’t work in the UK context as such a high proportion feel they are paying too much, so we have changed it to be more flexible to fit with our needs.”
The JRF says all households should be included (Photo: Chris Ratcliffe/Bloomberg via Getty)How would an affordable energy guarantee be funded?
Despite possibly costing as much as £7bn, the JRF has put forward several cheaper options that offer less support.
The JRF says right now, with the uncertainty from the Middle East, their “preferred approach would be that the Government funds this support in its entirety through tax receipts”.
These taxes could involved changes to capital gains, which “could raise more than £13bn per year by 2029-30,” or implementing National Insurance Contributions to investment income, which “would likely raise in excess of £10bn a year by 2029-30”.
Burnham has said he will stick to the manifesto not to raise the main rates of income tax, VAT or national insurance but has hinted there is room else where to tweak tax pledges.
The proposal also adds that “at other times the affordable energy guarantee could be partially or wholly funded by industry levies, consumer bills or borrowing, depending on micro and macro-economic circumstances”.
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