The Institute for Fiscal Studies (IFS) has questioned the chancellor's Budget pledge to cut average household energy bills by £150, warning that the longer-term savings will be far smaller.
Announcing the measure at Wednesday's fiscal event, Rachel Reeves said the energy company obligation (ECO) scheme would be scrapped, removing levies from bills, while the government would absorb most costs of older renewables subsidies for three years. The Treasury claims the combined measures will save an average of £154 from next April.
However, IFS director Helen Miller said the savings would drop to just £39 per year from 2029/30 when the temporary subsidy ends. She said: "While it has given some substantial tax cuts on energy bills over the next few years, the longer-term offerings are much more paltry, cutting only £39 per year off bills from 2029/30 onwards."
Climate campaigners reacted negatively to the scrapping of ECO, which provides efficiency measures such as insulation for fuel-poor homes. Ed Matthew of E3G called the move "morally indefensible", saying it would cost 10,000 jobs and prevent one million families from insulating their homes. Chaitanya Kumar of NEF argued the chancellor was wrong to say ECO costs more than it saved, noting the problem is a broken retrofit supply chain.
A Department for Energy Security and Net Zero spokesperson rejected the IFS findings, saying: "These claims are incorrect. The energy bill cut covers the current Spending Review period, and will be reviewed in the usual way at the next Spending Review." The government also announced an additional £1.5 billion capital investment for its warm homes plan.
