The three ways Burnham could cut your energy bills

Officials have drawn up contingency plans to cut further green levies from energy bills if prices remain high this winter, The i Paper has been told.

Chancellor Rachel Reeves’s Treasury has been working on plans for a support package for households after energy prices soared following Donald Trump’s war with Iran.

Makerfield MP Andy Burnham, who is currently expected to become the next prime minister, is expected to stick to the current Government’s commitment to provide help if energy prices stay high this winter.

Sir Keir Starmer’s much-delayed Defence Investment Plan had one big bet at its heart: drones are the future of warfare.

American company Anduril makes the “Seabed Sentry“- a weighted cylinder that uses sensors and AI to monitor what is happening under the sea. They could be used to listen out for spying and sabotage by Russian submarines. They are far cheaper than crewed submarines using traditional sonar.

A dozen of the cylinders can be dropped onto the seabed at a time by an autonomous submarine, with the devices forming a network which communicate between themselves and listens out for undersea activity.

The UK is woefully unprepared with the Royal Navy in a desperate condition. Whoever sits in Downing Street come next September will need to address matters of defence, homeland and cyber defence especially, with urgency.

Officials have drawn up contingency plans to cut further green levies from energy bills if prices remain high this winter, The i Paper has been told.

Several options are now circulating among Burnham’s transition team who are believed to be weighing up how to deliver on that pledge. A Treasury source said work on a package was ongoing to help with rising costs.

Burnham could remove remaining green levies from energy bills, funded through general taxation instead.

One proposal would be to raise the bank surcharge from its current 3 per cent.

Replace stamp duty, loosen fiscal rules and tax the capital gains uplift on inherited assets.

A written statement published by the Chancellor said the remaining sum would be “confirmed at Budget 2026, in a fair and balanced way”.

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In his first major speech since returning as an MP, Burnham said: “I heard on doorsteps in Makerfield how people need a bit extra now to help with rising costs… I will do my very best to deliver it and, while not taking risks with the public finances, will seek to give Britain some breathing space as soon as I can.”

A Treasury source told The i Paper work on a package was ongoing, pointing to the £150 cut to the average household energy bill after Reeves overhauled green levies in her last budget. The source added that there was “more you can do in the same space”.

With Burnham on course to enter Downing Street as soon as 20 July, energy bills may become one of the first big policy tests of his prospective premiership.

Several options are now circulating among his transition team, who are believed to be weighing up how to deliver on that pledge.

Ofgem’s energy price cap rose by 13.5 per cent today, from £1,641 to £1,862, adding £221 a year to a typical household’s bill. This has been driven by higher wholesale gas prices linked to the conflict between the US, Israel and Iran.

The price cap is set independently by the energy regulator, but the Government does have other ways of influencing bills.

One of these is green levies, which are added to bills on top of the wholesale price of energy to pay for things like renewable schemes and support for low-income households. As levies sit on top of the wholesale price, they can be moved off bills and funded through general taxation instead.

Reeves did this last November, saving households £150 by shifting three-quarters of the “Renewables Obligation” onto taxation, scrapping the Energy Company Obligation and adjusting VAT.

But levies only affect part of the bill and cannot completely offset rises driven by wholesale prices.

Energy consultancy Cornwall Insight forecasts that bills will drop only slightly in October to £1,849, offering little relief to families.

Its principal consultant, Craig Lowrey, said “October bills always hit harder than July’s because people are turning their heating on again”, meaning any relief would need to land before winter to be felt.

The Treasury has been examining whether further cuts to green levies on energy bills could be made to reduce the costs to households – but exactly how this would work remains unclear.

However, The i Paper understands that Burnham’s first budget could remove most remaining green levies from household and business energy bills, funding the change through general taxation instead.

The plan under consideration by Burnham’s transition team would be paid for by reforming capital gains tax (CGT) – the tax paid on profit when someone sells an asset such as shares or a second home – currently capped at 24 per cent, to align with the 40 per cent higher income tax rate.

The idea originates in a report by Mainstream, the Left-wing group that has long championed Burnham. It argues that a “fully tax-funded cost of living relief agenda” would have no impact on borrowing and therefore would not alarm markets – in other words, it would be paid for by tax rises rather than extra government borrowing.

The report cites research from the Centre for the Analysis of Taxation suggesting comprehensive CGT reform could raise an extra £14bn.

A rival option, pushed by the Trades Union Congress (TUC), would raise the bank surcharge from its current 3 per cent, with proposals ranging from a £9bn increase over four years to a £60bn increase if it were pushed to 35 per cent, matching the windfall tax once imposed on energy firms.

The surcharge, a tax on top of standard corporation tax applied to banking profits, was cut from 8 to 3 per cent in 2023 under the Conservatives.

The TUC argues reversing that cut, or going further, is justified by the scale of banking profits, and wants the proceeds used to fund a permanent social tariff, a discounted energy rate for low-income households, something that currently exists for water and broadband customers but not for energy.

Paul Nowak, the TUC’s general secretary, told Sky News it was not unfair to ask “those with the broadest shoulders” to help fund support for households struggling with heating bills.
Banks paid more than £11bn in tax in 2024/25 through the levy, surcharge and corporation tax combined.

UK Finance, which represents more than 300 firms including major banks, has warned Burnham against such a move, claiming he would face an exodus of bankers from London.

Burnham ally Louise Haigh, who ran his Makerfield campaign, has meanwhile set out a separate three-part package aimed less at cutting bills directly and more at freeing up money for clean energy investment.

The first is taxing the capital gains uplift on inherited assets. Normally, if you inherit an asset and later sell it, you only pay CGT on any rise in value from the point you inherited it, not from when the original owner bought it. That earlier gain is effectively wiped clean when the asset is passed on following a death. Haigh’s plan would tax that wiped-clean portion too.

The second is replacing stamp duty with an annual property and land tax. Instead of a one-off lump sum on purchase, owners would pay a smaller annual amount based on the property’s value.
The third is loosening the fiscal rules to let the National Wealth Fund, the Government’s public investment vehicle, borrow against its own balance sheet. This would let it raise money for investment by borrowing against its own assets, rather than relying solely on Treasury allocations. This seems unlikely, as Burnham has pledged to stick to the Chancellor’s fiscal rules.

Unlike the levy-cutting and bank tax plans, Haigh’s proposals are not primarily about lowering bills in the short term, but about building the fiscal headroom for investment that could bring costs down over the longer term.

Any plan to cut bills that Burnham chooses will have to compete for the same pot of money as a separate, unrelated problem he is also inheriting – a £4.7bn shortfall in Sir Keir Starmer’s defence spending plan, which sets out how much the UK will spend on the military over the next four years.

A written statement published by the Chancellor, who is unlikely to be kept on in the role by Burnham, said the remaining sum would be “confirmed at Budget 2026, in a fair and balanced way”.

The Government currently has around £24bn of “headroom”, the amount it can spend or give away in tax cuts without breaking its own borrowing rules, and using more of that on defence would leave less available for bill support.

Starmer has already ruled out one way of bridging the gap without eating into that headroom, telling an audience in Berkshire that “defence bonds”, a form of government borrowing specifically for military spending, are “just borrowing by another name”.

Ofgem will confirm the next price cap, covering October to December, on 26 August, by which point Burnham is expected to have set out more on how he intends to deliver on his cost of living promise.