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Martin Lewis backs ‘social tariff’ that could cut energy bills

Charities and the consumer champion Martin Lewis have ramped up pressure on the government to implement a “social tariff” for energy, which new research estimates could save 12m households on the lowest incomes up to £1,500.

Citizens Advice and Lewis have backed a push to introduce a special tariff for those struggling to pay gas and electricity bills by next year. In contrast, energy suppliers have said they are “ready” to work up the proposals.

The energy crisis, exacerbated by the war in Ukraine, has sharply increased household costs, leading to calls for a revamp of gas and electricity billing. The prepayment meter scandal has added further urgency to the push for support for struggling households.

The government and regulator Ofgem are examining how a social tariff designed to protect low-income households from energy price increases could be constructed and funded.

A major report by Citizens Advice and the thinktanks Public First, and the Social Market Foundation said a tariff could be constructed that identifies consumers with high energy use relative to their household income, using a combination of data from HMRC and energy suppliers.

The authors argue that such a tariff should extend beyond consumers’ means-tested benefits. They said it could be paid through a lump-sum government cash payment taken directly off bills based on a set formula.

The two other main options proposed in the report were a fixed discount on bills with larger reductions for lower-income households or discounts on the units of gas and electricity used.

The study showed that if the chancellor, Jeremy Hunt, ignores calls to U-turn on a plan to cut energy support in April at this month’s budget, 12m households will face “crisis level” energy costs.

Suppose Hunt, as expected, maintains the government’s price guarantee at its current level, capping typical bills at £2,500 instead of raising the limit to £3,000. In that case, 10m households will spend more than 10% of their income on energy, excluding housing costs.

The study, which follows a nine-month consultation, showed that more than 12m households on the lowest incomes would qualify for support, and the average qualifying household would see their annual energy bill reduced by £381 – with some getting as much as £1,500. The cost to the Treasury would be £5.6bn.

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