Nesta has responded to the Budget announced by the chancellor today (28 October).
Today’s Budget revealed the removal of the gas standing charge on energy bills, which the organisation called for in July, extending the removal of VAT from electricity bills to July 2027 and £100 household energy payments to millions of households
Furthermore, the Budget also reduced funding for the Boiler Upgrade Scheme (BUS) that provides grants for low-carbon home heating installations. Nesta estimated that this could mean tens of thousands fewer people are able to access support to install low-carbon heating, such as heat pumps, up to 2030.
Madeleine Gabriel, director of sustainable future at Nesta, said: “In the face of a growing energy crisis caused by the rising cost of fossil fuels, the government has rightly got on the front foot with measures to reduce energy bills now and in the future. Direct energy payments and extending the removal of VAT on electricity will provide millions of households with a bigger cushion against the financial drain of a difficult winter.
“To bring down our reliance on fossil fuels in the long term, removing the gas standing charge is the right first step, while a commitment to remove levies on electricity bills could finally stop people being penalised unfairly for switching away from gas heating. Electrification of heating, including getting people to switch to heat pumps, is our best long-term shield against rising gas prices because it reduces the UK’s reliance on imported fossil fuels.
“Despite these positive measures, reduced funding for the grant scheme for heat pumps could mean tens of thousands fewer people are able to access support to install low-carbon heating over the coming years. To give families lasting protection from international market shocks, the government should focus on measures that spread energy costs fairly and continue to lower electricity prices relative to gas. Removing levies from electricity bills will be the most impactful approach, while government could go further by fixing a floor and ceiling on gas prices.”
Nesta proposed abolishing the gas standing charge in the summer, finding that doing so would save the typical dual fuel household £27 per year, while costing the Treasury nothing. The organisation estimated that 86% of the poorest households would be better off with the gas standing charge abolished.
Nesta has recommended moving levies on electricity bills and onto general taxation since before the 2024 election, including in its 2023 report A policy plan for decarbonising home heating. The organisation has also proposed the government introduce a floor and ceiling for gas prices, through a gas price stabiliser policy.