Thursday 15 October 2026
Night Edition
ZOTPAPER

News without the noise

ZOTPAPER
Business

UK energy secretary explores ‘rising block tariff’ to ease household bills

Miatta Fahnbulleh has asked officials to model a system that would give each household a cheaper allowance for essential energy use, with higher rates for extra consumption.

By LineZotpaper
Published
Read Time2 min
UK energy secretary Miatta Fahnbulleh is actively exploring a “rising block tariff” (RBT) that would give every household an initial block of cheaper gas and electricity to cover “essential” use, then charge higher rates for additional units. The move comes as industry projections point to an annual increase of around £400 in bills this January, and as the government prepares a £1bn support package for poorer households.

Fahnbulleh, who has set reducing bills as her top priority, has instructed officials in her department to examine an RBT model. The proposal is backed by the New Economics Foundation – the thinktank she used to lead – and by the Joseph Rowntree Foundation, which argues that with £5bn of public money the government could fund an RBT that would deliver the largest bill reductions to low-income households.

Chancellor John Healey is expected to announce £1bn of extra winter support in this month’s budget, likely via the existing warm homes discount, which critics describe as a “clunky” mechanism. Longer-term options under discussion include a permanent cut to VAT on electricity, shifting green levies into general taxation, and a formal “social tariff” for energy.

However, the RBT proposal has its detractors. The Guardian’s Nils Pratley notes that there are “at least three reasons why an RBT has few fans”, though the full arguments were not detailed in the reporting. The idea would mark a significant departure from Britain’s current flat-rate energy pricing and would require careful design to avoid unintended incentives or administrative complexity.

The energy secretary has been blunt about her goal: “My mark of failure or success is whether I can get bills down or not. That’s the only thing I’m in this job to do.”

§

Analysis

Why This Matters

  • Household energy bills are set to rise by roughly £400 annually in January, squeezing millions of households already struggling with the cost of living.
  • The rising block tariff represents a significant policy shift: it would deliberately charge heavy energy users more, breaking from the traditional flat-rate model and raising questions about fairness and incentives.
  • The budget later this month will signal whether the government will stick with temporary support or commit to a structural reform like an RBT.

Background

Britain’s domestic energy market operates under a price cap that limits how much suppliers can charge per unit of gas and electricity. Since the energy crisis triggered by the Ukraine war, wholesale prices have remained “stubbornly high”, and the government has used various short-term measures – including the warm homes discount and a six-month VAT cut on electricity – to protect vulnerable households. The chancellor’s upcoming budget is expected to extend some of that support, but there is growing pressure for a more targeted, long-term solution. The rising block tariff, sometimes called a “lifeline tariff”, has been debated for years but has never been implemented in the UK.

Key Perspectives

Government (Energy Secretary Miatta Fahnbulleh): Reducing bills is her overriding objective. She is exploring an RBT as a fairer way to cover system costs, and has asked officials to model the approach. Supporters (New Economics Foundation, Joseph Rowntree Foundation): An RBT funded by public money would cut bills most for low-income households, who tend to be light energy users. The Joseph Rowntree Foundation estimates that £5bn in government funding could deliver significant savings at the bottom of the income distribution. Critics: The RBT has few fans among energy companies and some policy analysts. Concerns include administrative complexity, potential for heavy users to face unaffordable bills, and the risk that the tariff could distort consumption without tackling the root causes of high wholesale prices.

What to Watch

  • The chancellor’s budget announcement later this month for any detail on a social tariff or permanent VAT change.
  • Whether the energy secretary publishes a formal consultation on the rising block tariff model.
  • Energy price cap forecasts for January and the rest of 2027, which will shape the political urgency of reform.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

How we workSubscribe