Targeting energy bill support at poorest households will not protect enough people from coming energy price spike

As households prepare for an unprecedented spike in gas and electricity bills this winter, the chancellor should use next week’s autumn budget to provide universal support and reduce energy bills by £210 on average, the New Economics Foundation (NEF) has said.

The chancellor is rumoured to be considering a boost to the warm homes discount, which will help households receiving benefits. But NEF economists have warned that this will still leave millions exposed to unaffordable energy.

A recent proposal from the Resolution Foundation called for the government to give energy bill discounts to the poorest households. But NEF analysis has found that this means-tested approach would be overly complicated to administer and would leave 1 million low-income households without any support.

The price of natural gas has increased by 22% in the last month, has doubled since the summer, and has trebled since December last year. As a result, forecasters predict energy bills could rise by up to 25% when the next price cap period starts in January next year, as the impact of the US war on Iran continues to hit UK households. 

Previous NEF analysis showed that bills will rise higher even than their peak following the Russian invasion of Ukraine, when government support schemes helped blunt the impact on bills.

The government has already cut VAT on electricity bills and moved some green levies from bills onto general taxation to protect households, but this support has been overtaken by the rise in bills. NEF economists have warned more support is needed to prevent millions from being unable to afford to turn on the heating or run basic appliances over the winter.

They have urged the government to bring in a ​“national energy guarantee”, which would cap a block of essential energy for every household at late 2024 prices. This would cut the cost of January’s energy bills by around 25% for electricity and 40% for gas, ensuring that every household can afford to stay warm and run lights, fridge and washing machine. 

If combined with the £100 warm homes discount increase rumoured to appear in the autumn budget, the national energy guarantee would save £290 for households receiving benefits and £190 for households not receiving benefits, at a cost of £6bn to the Treasury. NEF economists have said that this could be entirely offset by a tax rise, such as reforming capital gains tax or a windfall tax on banks.

Dr Alex Chapman, head of economic and environmental policy at NEF, said:

“Everybody should be able to have enough energy for the absolute essentials – to stay warm and keep the lights, the fridge and the washing machine on this winter.

“But as households across the UK continue to pay the price for the US war with Iran and our reliance on global fossil fuels, millions once again risk being forced to choose between heating and eating early next year.

“Providing a universal package of support for energy bills this winter is the only way the government can guarantee that every household needing support will receive it and ensure no one is left behind.”

Notes

The New Economics Foundation is a charitable think tank. We are independent of political parties and committed to being transparent about how we are funded

The analysis will be available here: https://​newe​co​nom​ics​.org/​2​0​2​6​/​1​0​/​w​h​y​-​w​e​-​n​e​e​d​-​a​-​n​a​t​i​o​n​a​l​-​e​n​e​r​g​y​-​g​u​a​r​a​n​t​e​e​-​a​t​-​t​h​e​-​b​udget 

NEF’s energy bills model uses the Living Costs and Food Survey 2024 – 25 microdata. This is combined with NEF analysis of the Ofgem price cap model. Forecasts for prices for Q1 2027 are used, with expected energy prices taken from EDF Energy’s price cap forecast as of mid-October 2026. Price forecasts can change rapidly day-to-day. NEF’s discounted block of energy applies to the first 1,800kwh and 6,100 kWh of household electricity and gas consumption per year respectively.