Chancellor John Healey is considering increasing the Warm Home Discount from £150 to £250 as part of a wider package aimed at helping poorer households cope with rising energy bills. The proposal could form a central part of this month’s Budget, with more than £1 billion being considered for consumer support.
The move comes as ministers respond to forecasts suggesting the energy price cap could rise sharply in January. According to The Guardian, the Iran war could push the cap up by as much as £442, potentially cancelling out the effect of the earlier VAT reduction on electricity bills announced by Prime Minister Andy Burnham.
Warm Home Discount Could Rise by £100
The most likely short-term measure under consideration is an increase in the Warm Home Discount, which currently provides £150 off energy bills for households receiving certain benefits. The existing scheme is funded through energy bills, but the additional £100 being examined by the Treasury would instead be paid for by taxpayers.
According to the Birmingham Mail, Healey is working on plans involving more than £1 billion of support for energy consumers, with the larger share expected to be directed towards households already qualifying for the discount.
No final decision has been taken. Energy Secretary Miatta Fahnbulleh has argued for a broader intervention that would remove levies from household energy bills altogether, reducing bills for all consumers by as much as £120.
Those levies currently fund renewable energy and energy-efficiency schemes. Transferring their cost from bills to general taxation would cost as much as £3.2 billion. The proposal could also reduce inflation, although the government would face difficulties reversing the change if energy prices later fell.
Healey is balancing the pressure for further household support with wider spending demands. The chancellor is looking for funding for an additional £4.7 billion in defence spending while also attempting to rebuild the government’s fiscal buffer after higher borrowing costs reduced the amount available.
Officials Examine Wider Changes to Energy Tariffs
Separate work is taking place inside the energy department on longer-term changes that would affect the prices suppliers can charge different groups of customers rather than relying only on government subsidies.
One option is a social tariff, under which poorer households would pay less for each unit of electricity than higher-income customers. According to The Guardian, establishing such a system would require significant data collection involving tax authorities, the Treasury and energy companies, meaning it would take longer to introduce than measures expected in the coming Budget.
Officials are also considering a “rising block tariff”, under which prices would vary according to consumption rather than household income. The model, previously proposed by the New Economics Foundation when Fahnbulleh led the organisation, would offer a cheaper rate for a defined level of essential energy use before higher charges applied above that threshold.
Alex Chapman, the foundation’s head of economic and environmental policy, said a serious price increase was approaching and called for targeted help for vulnerable households alongside broader protection.
Joseph Rowntree Foundation policy director Alfie Stirling said winter support should reach most households while directing the greatest assistance towards those in the greatest need. He also argued that measures should, where possible, reduce prices themselves and therefore help bring inflation down.
A Treasury spokesperson said tax decisions remained a matter for the chancellor to announce at fiscal events rather than through responses to speculation or individual proposals.
