Budget Pledge to Slash Energy Bills Meets Reality Check
Chancellor Rachel Reeves has committed to reducing the average household energy bill by £150, a central pledge from her November 2025 Budget. The plan involves terminating the Energy Company Obligation (ECO) scheme and having the government temporarily absorb the cost of subsidies for older renewable energy projects.
The Treasury asserts that, combined, these actions will save the typical home £154 annually starting next April. However, this immediate financial relief has been met with a stark warning from a leading economic think tank regarding its long-term viability.
IFS Forecasts Drastic Drop in Future Savings
The Institute for Fiscal Studies (IFS) has delivered a sobering analysis, indicating that the proclaimed savings are largely temporary. According to the IFS, once the government's three-year subsidy support ends, the average annual saving on energy bills will collapse to a mere £39 from the 2029/30 financial year onwards.
Helen Miller, Director of the IFS, commented on the disparity, stating, “While it has given some substantial tax cuts on energy bills over the next few years, the longer-term offerings are much more paltry.” This assessment challenges the Chancellor's assertion that tackling high energy costs is a primary focus in the fight against the rising cost of living.
Climate Campaigners Condemn "Devastating Blow" to Green Homes
The decision to scrap the ECO scheme, which funds energy efficiency measures like insulation for fuel-poor households, has provoked strong criticism from environmental groups. Campaigners label the move a “devastating blow” that eliminates a key mechanism for permanently lowering bills through improved home efficiency.
While the government has announced an additional £1.5 billion in capital investment for its Warm Homes Plan, critics argue this does not compensate for the lost funding. Ed Matthew, Campaigns Director at the climate think tank E3G, stated the decision “fatally undermines the best long-term solution to fuel poverty” and could cost 10,000 jobs while preventing a million families from insulating their homes.
Chaitanya Kumar of the New Economics Foundation highlighted that the problem lies with a “broken retrofit supply chain” rather than the principle of the ECO scheme itself. He warned that replacing £6.4 billion of ECO support with a £1.5 billion fund risks leaving thousands of low-income households in cold, inefficient homes, denying them permanent savings.
