Andy Burnham is considering radical plans that could cut household energy bills by £130 a year and make running a heat pump cheaper than a gas boiler. In his speech on Friday as he became the new Labour leader, Burnham promised to reduce the price of “essentials”, and a cost of living package is expected to be one of his first announcements in Downing Street.
How the Energy Shake-Up Works
The energy proposal, drawn up by the thinktank Nesta and being examined by Burnham’s team, would change the way household gas is charged and remove some policy levies from bills, at a cost of £3.2bn a year to the taxpayer. Making electricity cheaper relative to gas would make running heat pumps a more attractive option, and shave £130 off average bills.
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Andrew Sissons, the director of Nesta’s sustainable future project, said: “For years, legacy policy costs have been heavily loaded on to electricity bills, making clean heating options artificially expensive.”
Key Benefits for Households
- Immediate savings: £130 per year off average household energy bills
- Cheaper heat pumps: Running a heat pump could become more affordable than a gas boiler
- Debt relief: A one-off £2.7bn bailout to wipe out consumer electricity debts for 2 million households
- Reduced unpaid bill costs: Cuts the £29 yearly charge households pay to cover unpaid bills
Comparing Current vs. Proposed Energy Costs
| Cost Factor | Current System | Proposed Reform |
|---|---|---|
| Average annual bill | £1,200 | £1,070 |
| Heat pump operating cost vs. gas boiler | More expensive | Cheaper |
| Policy levies on electricity | High | Reduced |
| Consumer debt coverage fee | £29/year | £0 (with bailout) |
Political Implications
Speeding up the adoption of heat pumps would burnish the new PM’s green credentials, which have been questioned by some in Labour since it emerged that he had rejected the energy secretary Ed Miliband as his chancellor in favour of the home secretary Shabana Mahmood. Burnham insisted on Friday that he had made no final decisions about his top team, which is expected to be announced on Monday.
Under the proposed reforms, Nesta argued, the government should also wipe out the backlog of consumer electricity debts, at a one-off cost of £2.7bn. As well as providing debt relief for about 2 million households, this bailout would cut the £29 a year paid by all households to cover the cost of unpaid bills. The costs of any package would have to be met in the new chancellor’s first budget this autumn.
FAQ
How much will the energy plan save households?
The plan could save the average UK household around £130 per year on energy bills, primarily by making electricity cheaper relative to gas.
Will heat pumps become cheaper than gas boilers?
Yes, under the proposed reforms, running a heat pump would become cheaper than a gas boiler, encouraging wider adoption of clean heating technology.
What is the cost to taxpayers?
The reforms would cost taxpayers £3.2bn annually, plus a one-off £2.7bn to clear consumer electricity debts, funded through the upcoming budget.
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