Martin Lewis Welcomes Potential Cuts to Energy Bills for Low-Income Families

Consumer advocate Martin Lewis has expressed optimism regarding reports that the UK Government may reduce energy bills for low-income households. On September 22, 2023, Lewis welcomed discussions among ministers about possible cuts to the standing charges on gas and electricity bills, which disproportionately affect struggling families.

Standing charges are fixed daily fees that all consumers must pay, regardless of their actual energy usage. Currently, these charges amount to approximately £188 for electricity and £109 for gas, with increases expected to £196 and £124 respectively next month. Lewis highlighted that these flat-rate charges hit poorer households the hardest, making it difficult for them to manage their energy costs.

In a statement, Lewis remarked, “Energy standing charges to be lowered in the budget? Glad to see the government may be listening.” His comments followed a suggestion he made the previous week, indicating that he believes the government is starting to recognize the issue.

The government has acknowledged that many consumers feel the burden of their bills is too heavily weighted towards standing charges. A spokesperson stated, “We know that, for many consumers, too much of the burden of the bill is placed on standing charges, and we are working with Ofgem to reduce them.” The Office of Gas and Electricity Markets (Ofgem) recently announced plans to require energy suppliers to offer low or no standing charge tariffs starting in early 2026.

While many support the idea of reducing these standing charges, Energy UK, a prominent trade association, cautioned that such measures could lead to higher unit prices for energy. This concern arises amid reports suggesting that the government may also consider reducing the value-added tax (VAT) on energy bills by 5% in the upcoming budget scheduled for November.

Lewis highlighted that a VAT reduction would likely favor higher energy users, who are often higher earners. He conducted online polls indicating that the majority of respondents—seven in ten—prefer a reduction in standing charges over cuts to energy VAT. He commented, “Interesting to read there are rumours of getting rid of the 5% VAT on domestic energy bills. This would of course cut people’s costs. Yet it would, in cash terms, benefit higher users more, they are often (though not always) higher earners.”

Lewis proposed that redirecting funds from energy VAT to lower standing charges could be a more equitable solution for struggling households. This suggestion aligns with his ongoing advocacy for policies that prioritize the financial well-being of lower-income families in the UK.

As discussions continue regarding potential changes to energy pricing structures, the focus remains on ensuring that support measures effectively address the needs of vulnerable households.