The government’s plan to knock an average £150 off household energy bills from April 2026 has been welcomed by University of Reading experts, who say the shift could make the UK’s energy system fairer, cleaner and more affordable.
Under the reforms, the ECO4 levy on energy bills will be scrapped and replaced with a tax-funded Warm Homes Plan – removing costs from consumers and reshaping how the transition to cleaner energy is paid for.
Professor Chris Hilson, Director of the Reading Centre for Climate and Justice, said the change marks a rare Budget decision that delivers for both climate policy and social fairness.
“Reducing prices on domestic energy bills by scrapping the ECO4 scheme and putting money saved into the equivalent Warm Homes Plan instead is an important social justice and climate win,” he said.
He added that the old levies had long been unfair.
“Green levies on bills are regressive because lower-income households spend a greater proportion of their overall income on energy. The ECO4 scheme was funded from bills and was regressive. The Warm Homes Plan – a broadly equivalent and much-needed home energy efficiency programme – is progressive because it’s funded by general taxation.”
Hilson also highlighted the climate benefits:
“It’s also a climate win because we need to reduce the costs of electricity bills relative to gas, to make running heat pumps and charging EVs more financially attractive.”
He pointed out that electricity bills have historically carried a larger share of environmental levies.
“Removing levies from energy bills and funding the programs they support from taxation instead will therefore also be good for decarbonising our economy.”
Professor Jacopo Toritti, Professor of Energy Economics and Policy, said cheaper electricity will be essential to accelerating the UK’s shift to electric heating and transport.
“The cut in electricity bills is a welcome step for households, and lower electricity prices are vital for supporting the shift to electric heating and electric vehicles,” he said.
He noted that a key driver of the price drop is the government’s decision to take on most Renewables Obligation costs.
“A major driver of this reduction is the government’s decision to take on 75% of the Renewables Obligation costs, which are currently paid by all energy consumers through their bills.”
Toritti stressed that spreading these costs more widely is the right call.
“Moving these costs into general taxation – broader and more progressive than energy bills – effectively socialises the cost of energy policy across society rather than concentrating it on bill payers.”
He also backed the move to ditch the ECO scheme.
“Scrapping the ECO scheme is also the right decision: it had become increasingly inefficient, adding significant costs to everyone’s bills while delivering only limited savings for those it was meant to help.”
