More than 140 organisations wrote to the Government in October 2023 urging it not to abandon plans to consult on tariff reform, according to a campaign timeline published by the End Fuel Poverty Coalition1. The letter followed a July 2023 report that the Government appeared to rule out a consultation on a social tariff1.
The Government had said in May 2023, in response to petition 624795, that it intended to consult on options in summer 2023, and that officials were considering potential options, including discounted tariffs, for a new approach to consumer protection in energy markets applying from April 2024 as part of wider retail market reforms1. On 18 April 2023 the Secretary of State for Energy Security and Net Zero told the House of Commons: "We do think that things like a social tariff could be very helpful…"1. On 18 January 2023 the Prime Minister told the House of Commons that "we are also consulting on the best thing to do [on energy bills] going forward, including options… such as a social tariff, as part of our wider reforms of the retail energy market"1.
The coalition's page sets out several tariff proposals. The social tariff proposal, attributed to David Southgate, formerly of Age UK, discounts energy bills by 50% for eligible households. If an overarching price cap is still in operation, such as the Energy Price Guarantee, it would be set 50% below the cap; if markets have returned to normal, the discount would be 50% below the average tariff rate1. Eligible households include those on means-tested benefits, disability benefit, Carer's Allowance, and in theory anyone below the 60% median of household income1. The proposal allows a £500 million ring-fenced flexible support fund and asks the Government to finance the social tariff directly from Treasury spending to avoid consumer cross-subsidies1. The lowest cost expectation is £5.6bn for 2024-25, assuming a typical bill of £1,000 a year, with the most likely annual cost calculated as between £5.6bn and £9.4bn1.
A separate proposal from the New Economics Foundation, described as Universal Basic Energy, would use a Rising Block Tariff model with two or three bands. The first band offers a free basic amount of energy for every UK household, based on average essential consumption calculated at 1050 units of electricity and 2700 units of gas, with 50% of these units free for every household1. Three additional allowances, costing roughly £2.4bn, would exempt households on means-tested benefits from premium rates and provide an extra free block per child per household and per disabled resident1. Fuel Poverty Action's Energy For All proposal starts with a free allocation of energy based on need, funded substantially from fossil fuel profits1.
"OCTOBER 2023: Over 140 organisations write to the Government urging them not to abandon plans to consult on tariff reform."
Why it matters for households
Tariff reform concerns how the unit price of gas and electricity is set, and therefore what a household pays for each unit it uses. The proposals described would change who pays which rate rather than the total cost of energy: the social tariff would cut bills by half for households meeting eligibility criteria, while the rising block model would make a set quantity of units free for every household and charge premium rates for very high use1. The coalition states that under the Universal Basic Energy model over 90% of households in the bottom income groups would see a net reduction in their energy bills, with high-income high-usage consumers cross-subsidising low-income low-usage households1. It also states that the social tariff must automatically include eligible households, so they do not need to switch supplier, and must be universal across suppliers, including households on fixed tariffs and those using alternative fuels and payment types such as prepayment meters1. The detail of how any scheme would be administered, and by whom, has not been reported.
What happens next
The coalition's timeline records that in September 2023 the House of Commons Energy Security and Net Zero Committee came out in favour of a social tariff for specific groups of consumers1. In November 2023 proposals for an Emergency Energy Tariff, using the Energy Price Guarantee mechanism, were presented to Government1. In January 2024 coalition members called for a social tariff to be included in the 2024 Spring Budget, and in March 2024 the Chancellor confirmed the end of the Energy Price Guarantee and did not include tariff reform in the Spring Budget1. In April 2024 Ofgem and the Government both launched reviews of the Energy Bills Price Cap1. Polling published in June 2024 suggested that just 11% of the public oppose the idea of a social tariff1.
Sources1 cited
- What next for energy bills? - End Fuel Poverty Coalition, endfuelpoverty.org.uk