Andy Burnham considers radical shake-up to cut energy bills

Andy Burnham is exploring significant reforms that could slash household energy bills by £130 a year and make running a heat pump more economical than a gas boiler. These potential changes are part of a broader cost-of-living package expected from Burnham, who recently became the new Labour leader.

The proposal, currently under review by Burnham's team, was drafted by the thinktank Nesta. It involves altering how household gas is charged and removing certain policy levies from bills. The estimated annual cost to the taxpayer for these changes is £3.2 billion.

By making electricity comparatively cheaper than gas, the reforms would boost the appeal of heat pumps. Andrew Sissons, director of Nesta's sustainable future project, stated, "For years, legacy policy costs have been heavily loaded on to electricity bills, making clean heating options artificially expensive. By combining a zero-taxpayer-cost reform of the gas standing charge with these targeted tariff cuts, the government can deliver around £130 a year in immediate financial relief for the majority of UK households, while making clean heating the cheapest option on the market."

Accelerating the adoption of heat pumps could also enhance Burnham's environmental credentials. Nesta's plan also suggests wiping out the backlog of consumer electricity debts, estimated at £2.7 billion, which would provide debt relief for approximately 2 million households and eliminate the £29 annual charge all households pay to cover unpaid bills. The funding for such a package would likely need to be addressed in the new chancellor's first budget, potentially through tax increases.

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For years, legacy policy costs have been heavily loaded on to electricity bills, making clean heating options artificially expensive. By combining a zero-taxpayer-cost reform of the gas standing charge with these targeted tariff cuts, the government can deliver around £130 a year in immediate financial relief for the majority of UK households, while making clean heating the cheapest option on the market.