Budget Analysis: Energy Costs Remain High

Household energy bills in Britain will remain higher this year than during the previous price shock, according to a new analysis by the Resolution Foundation. The thinktank published its report on Thursday, evaluating the first budget delivered by Chancellor John Healey. The organization described the package as a scattergun approach that does not effectively raise living standards.

The budget introduces specific measures to reduce energy costs for consumers. It scraps standing charges on gas bills and provides £100 in energy payments to up to 20 million households. To qualify for these payments, homes must fall within council tax bands A through D. The foundation noted that this system relies on property valuations from 35 years ago to determine eligibility.

The report found that the financial support is not well targeted toward those with the lowest incomes. The poorest half of households will receive an average of £158 in support across the current and next fiscal years. The richest half will receive £144. This represents a difference of only £14 between the two groups. Ruth Curtice, the foundation’s chief executive, stated that the data shows a complete failure to target help at those who need it most.

Looking ahead to the end of the parliamentary term in 2028 and 2029, the foundation forecasts a decline in typical disposable incomes. The report projects that these incomes will fall by £1,050. This reduction limits total income growth over the five-year parliament to just £600. Curtice argued that cost of living support is spread too thinly, leaving families facing higher energy bills than during the last major price increase.

Curtice characterized the current parliament as having two distinct halves. The first half featured rising living standards and solid economic growth, supported by large tax increases for public service funding. She noted that the second half faces a projected £1,000 drop in disposable incomes. The foundation’s chief executive said the budget did not clarify how the government will balance public service ambitions with household income levels. She indicated that next year will bring starker choices for policymakers.

Chancellor Healey acknowledged a difficult global economic environment. He cited the Office for Budget Responsibility, which recently cut its forecast for gross domestic product growth next year. The chancellor pledged to steer the country through this turbulence and rewire the economy for growth. His budget also includes tax breaks for high street businesses and higher taxes on banks and gambling operations.

Andy Burnham defended the fiscal package in interviews with broadcasters. He described the move to help 20 million households with energy costs through the council tax cut as bold. Burnham added that lifting 70,000 businesses out of business rates entirely would provide a real lift to high streets across the country.