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Inflation: evidence and policy appraisals

Detailed research records, alternatives, costs and provisional assessments. These records preserve different scopes and historical reviews; they are not an additional ranked action plan.

Evidence → choices → outcomes

What could improve it?

CPI inflation back at the 2% target and staying there, with lower-income households better able to afford essentials at today’s higher price level.

These options link to their national assessment, including funding, delivery constraints and remaining uncertainties.

  • Assessed option · provisional

    Connect the power Britain needs

    8/10 criteria scored

    Coverage of the appraisal, not an impact score.

    Delivery: Red

    Whole-life costs incomplete

    Evidence and delivery constraints

    Engineering need and queue evidence exist; the marginal effects of queue reform and industrial bill relief are different questions.

    Separate queue management, network reinforcement and industrial levies; identify projects, kit, engineers and regulator decisions.

  • Assessed option · provisional

    Warm homes, inspected before payment

    Health-linked selection, independent inspection before payment and an evaluation inside the Warm Homes grants.

    9/10 criteria scored

    Coverage of the appraisal, not an impact score.

    Delivery: Amber

    Whole-life costs incomplete

    Evidence and delivery constraints

    Energy-saving evidence does not evaluate inspection-before-payment or prove health outcomes for this package.

    Target poor-quality homes; survey suitability/ventilation; use qualified installers and independent inspection; establish redress.

  • Assessed option · provisional

    A child-poverty target and essentials test

    7/10 criteria scored

    Coverage of the appraisal, not an impact score.

    Delivery: Amber

    Whole-life costs incomplete

    Evidence and delivery constraints

    A target does not itself reduce poverty. Modelled effects of a strategy do not establish the effect of the benchmark.

    Define poverty/essentials measures, then compare specific benefit, housing-cost and service changes; assign accountability.

This domain in the UK SWOT →UK National Action Plan →

How we assessed these options

What would it take to improve this?

Detailed policy appraisal

The outcome we want: CPI inflation back at the 2% target and staying there, with lower-income households better able to afford essentials at today’s higher price level.

The main constraint: The Bank of England sets interest rates independently to meet the 2% target and cannot lower world energy or food prices; the government’s levers — tax, benefits and how energy policy costs are recovered — change what households pay and receive, not the target, and every one of them has a fiscal or distributional cost.

Constraint type: market structure, money, coordination.

The options on the table

What is funded now, and the changes assessed against it — the current baseline and the alternatives, before the position today and the actions.

Provisional single-reviewer assessments from the 6 October 2026 review; not approved business cases, and not government policy.

Assessed with another page as home

These options also bear on this topic. The full assessment sits on the home page named under each.

  • Connect the power Britain needsDelivery risk: Red

    Home: Energy.

    Funded now
    Baseline: Ofgem approved the connections reform (Gate 2 firm queue) on 15 April 2025; NESO and the networks are issuing offers (Phase 1 deadline extended to 31 October 2026); Great British Grid was announced on 29 September 2026; industrial price relief (BICS) opens from April 2027. Enforcing the timetable and publishing time to connect as a regular measure is a UK Facts proposal, not government policy.
    The change assessed
    Not yet defined.

    Range if completed: 13.0–19.0 out of 30 (equal weights; not yet assessed: expected incremental benefit (Bn), incremental affordability (Co))

  • Warm homes, inspected before paymentDelivery risk: Amber

    Home: Energy.

    Funded now
    The Warm Homes Plan allocates £4,422m of low-income home grants for 2025–26 to 2029–30. The proposal here is targeting by need plus quality assurance, within that programme.
    The change assessed
    Health-linked selection, independent inspection before payment and an evaluation inside the Warm Homes grants.

    Range if completed: 17.0–20.0 out of 30 (equal weights; not yet assessed: incremental affordability (Co))

  • A child-poverty target and essentials testDelivery risk: Amber

    Home: Benefits.

    Funded now
    Not yet stated in the record.
    The change assessed
    Not yet defined.

    Range if completed: 12.0–21.0 out of 30 (equal weights; not yet assessed: increment beyond baseline (Ad), expected incremental benefit (Bn), incremental affordability (Co))

Alternatives already on record: 17 options listed under the points in the position today (12 without an action record), and 4 earlier options under other options compared. They have not been scored in the review.

The position today

  • What we can build on (1)
  • What is holding us back (3)The NAO finds that utility regulators have improved consumer protections, but debt, low social-tariff take-up and communication barriers persist for vulnerable consumers. Without clearer outcome measures, regulatory activity can be mistaken for improved affordability or service. (NAO report, 10 June 2026 · Ofwat (England and Wales), Ofgem (Great Britain), Ofcom (United Kingdom))
  • What could improve things (1)Help with what households pay can be separated from the job of hitting the target: lower policy costs on electricity and a transparent test of whether benefits cover essentials act on bills and incomes without asking interest rates to do it.
  • What could make it worse (1)

Which quadrant a point sits in is our analytical judgement, not a statistical category. Each point says whether it is a measured fact, our synthesis or a risk.

What we can build on Strengths

  • An explicit benchmark: the Bank of England’s Monetary Policy Committee sets interest rates independently to meet a 2% CPI inflation target set by the Chancellor.

    Measured factConfidence: High· Latest remit, 26 November 2025· United Kingdom

    Source: HM Treasury, Monetary policy remit: Budget 2025 (Remit letter (re-confirms the inflation target)); Bank of England, How do higher interest rates help to lower inflation? (Explainer opening)

    What government has committed to

    Policy: The Chancellor's remit of 26 November 2025 re-confirms the inflation target as 2% on the 12-month CPI, symmetric and applying at all times, with the MPC operationally independent.

    Who and when:
    Starmer government (to July 2026), 26 November 2025.
    Since 20 July 2026:
    Kept by the Burnham government. Re-stated under Burnham: in his 17 September 2026 open letter Chancellor Healey wrote that he 'respect[s] and fully support[s] the independence of the MPC' and that 'responsibility for returning inflation to the 2% target rests with the MPC'. No new 2026 remit letter found yet; the Bank of England Act 1998 requires one at least once in each 12 months from 1 June, usually published at a fiscal event. Source: HM Treasury, Letter from the Chancellor of the Exchequer to the Governor of the Bank of England (17/09/2026) (Paras 3-6 ('I respect and fully support the independence of the MPC'; measures i-iii; fiscal rules paragraph)).
    Source:
    HM Treasury, Monetary policy remit: Budget 2025 (letter from the Chancellor to the Governor) ('I hereby re-confirm the inflation target as 2 per cent'; section 'Price stability')

    Checked 4 October 2026. A commitment is not delivery.

    Options (2)

What is holding us back Weaknesses

What could improve things Opportunities

What could make it worse Threats

  • Energy shocks can push inflation up again. In September 2026 the MPC judged inflation risks tilted upwards while finding little evidence yet of material second-round effects in wages and prices. It held Bank Rate at 3.75%; its outlook is conditional, not an observed future outcome.

    Risk, not a certaintyConfidence: Moderate· MPC assessment, 17 September 2026· United Kingdom

    Source: Bank of England, Monetary Policy Summary and Minutes, September 2026 (Monetary Policy Summary and paragraphs 9–13)

    What government has committed to

    Policy: The 2% target remit and the government's stated approach: support MPC independence, meet the fiscal rules, work with partners to re-open the Strait of Hormuz, and give households 'breathing space' (electricity VAT, bus fares, fuel duty).

    Who and when:
    Burnham government (from 20 July 2026), 17 September 2026.
    Since 20 July 2026:
    Made by the current government. Stated in the Chancellor's 17 September 2026 letter. The Governor's letter says indirect effects of higher energy prices are expected to add about 0.6pp to CPI by 2027 Q1.
    Source:
    HM Treasury, Letter from the Chancellor of the Exchequer to the Governor of the Bank of England (17/09/2026) (Paras 3-6 ('I respect and fully support the independence of the MPC'; measures i-iii; fiscal rules paragraph))

    Checked 4 October 2026. A commitment is not delivery.

    Options (4)

The actions worth examining

Our shortlist for this page. Research quality, policy status, cost and funding are judged separately; none of these is government policy unless its status says so.Our shortlist. None is government policy unless its status says so.

  1. Make electricity pricing support cheaper clean heating — not yet costed / funding not identified
  2. Set an explicit test for whether benefits cover essentials — not yet costed / funding not identified
  • Action 1A17Policy status: external proposal

    Make electricity pricing support cheaper clean heating

    Move remaining levies off electricity onto gas or general taxation, with protection for households who cannot switch, so heat pumps become cheaper to run.

    Budget 2026 bears on this

    Budget 2026 cut VAT on electricity temporarily and removed carbon price support rates, which lowers electricity costs relative to gas.

    Support for Energy BillsCarbon Price Support (CPS)

    Assessment (draft, 6 October review)

    Not assessed in the 6 October review; this action stays in the topic plan with its own evidence.

    Who decides:
    DESNZ and HM Treasury, with Ofgem (Great Britain)
    Evidence:
    Modelled scenario. Distributional modelling on 2025 assumptions; outcomes depend on prices, usage and design.
    Expected effect:
    Direction plausible; size not established.
    Cost and funding

    Not yet costed

    Funding: Not yet costed / funding not identified

    Why it is shortlisted here: Energy drove the 2022 inflation peak; recovering policy costs mainly from electricity bills keeps clean heating dear to run. This acts on a price driver within the government’s own powers, not the Bank’s.

    What it takes
    The problem

    Policy costs recovered mainly through electricity bills make electric heating expensive to run relative to gas.

    Who is affected, and where

    Households in Great Britain, especially those heating with electricity or considering a heat pump. Territory: Great Britain. Northern Ireland has a separate electricity market; not assessed.

    Policy status

    Proposed by researchers or others, not government policy. Partly done: since April 2026, 75% of the domestic Renewables Obligation is funded from taxation for 2026–27 to 2028–29. Further rebalancing onto gas is a Nesta proposal, not government policy.

    The evidence
    What the research found:
    Moving Renewables Obligation and Feed-in Tariff levies to gas: about 8 million households pay less, about 19 million gas households pay about £20 a year more, and a typical switcher to a heat pump saves about £400 a year (all before compensation, on 2025 assumptions).
    Evaluated on:
    Ofgem household archetypes; Great Britain, 2025 prices
    Our recommendation (separate from the research):
    Re-run the distributional modelling on the post-April 2026 baseline by heating type and income before choosing a design.
    Strongest counter-evidence:
    After Budget 2025 policy costs are about a tenth of a typical bill, so further rebalancing has less to move; networks are about a third.
    Effects on record
    • Running cost of switching from a gas boiler to a heat pump: Direction plausible; size not established. modelled, limited confidence; Great Britain. Nesta modelled a saving of about £400 a year for a typical switcher, on 2025 prices before 75% of the Renewables Obligation moved to taxation; not re-run on today’s baseline, so no size is shown.
    • Bills of households that stay on gas: A cost or harm; size not established. modelled, limited confidence; Great Britain. Nesta put the rise at about £76 a year for gas households not eligible for support (about £20 for some 19 million households only if other levies also move to taxation, at about £1.1bn a year), modelled on the April 2025 price cap; households that cannot switch — many tenants — bear it. Corrected 4 Oct 2026 (was “about £20 before compensation”).
    Cost and funding

    Cost completeness: Not yet costed. Funding: Not yet costed / funding not identified.

    • Further levy rebalancing from electricity to gas or taxation (bill transfer; paid by bill-payers, central government): Not yet costed. A transfer between bill-payers (or to taxpayers), not a saving. Must be re-costed on the post-April 2026 baseline, after 75% of the Renewables Obligation moved to taxation.
    • Protection for households who cannot switch from gas (bill transfer; paid by bill-payers): Not yet costed. Nesta’s illustrative design: about £126m a year more for the Warm Home Discount core budget (£514m to £640m) and about £310m a year for a unit-rate discount, both levy-funded, at 2025 assumptions. Not re-modelled on the current baseline, so not shown as a cost.
    Who pays:
    Gas bill-payers or taxpayers, depending on the design; compensation from other bill-payers or a budget.
    Financing proposed:
    A transfer between bill-payers or to taxation — not a saving.
    Gap remaining:
    Not costed on the current baseline.
    What delivery needs
    Skills:
    Heat-pump installers for households to respond.
    Operational capacity:
    Supplier billing changes.
    Infrastructure:
    Network capacity for electrified heat.
    Permissions:
    Ofgem licence changes.
    Law:
    Possibly secondary legislation for levy schemes.
    Public consent:
    Gas households facing higher bills.
    First step and stages

    First step: Rerun distributional modelling for different heating types and incomes under current tariffs. (owner: DESNZ with Ofgem)

    1. Model and consult — DESNZ (proposed stage, not an official timetable)
    2. Legislate where needed — Parliament (proposed stage, not an official timetable)
    3. Phase in with compensation — Ofgem and suppliers (proposed stage, not an official timetable)

    Depends on: Installer capacity (A18); Compensation design

    Trade-offs
    Who gains and who loses:
    Gains for electric-heated and switching households; costs for gas households, many of whom — tenants especially — cannot switch.
    What else the money or effort could do:
    If funded from taxation, it competes with other spending.
    Strongest counterargument:
    Raising gas prices hits households who cannot change their heating.
    Risks:
    Unfair cost-shifting and already-enacted changes double-counted in the baseline.
    How we would judge it
    Baseline:
    Electricity-to-gas unit price ratio in the Ofgem cap.
    Leading indicator:
    Heat-pump installations.
    Outcome:
    Bills at matched consumption by heating type, fuel poverty and clean-heat uptake.
    Continue, adapt or stop:
    Continue if uptake rises without higher fuel poverty among gas households; adapt compensation otherwise.
    Sources

    Source published 5 June 2025 (Nesta); 28 July 2026 (UKERC); evidence reviewed 2026-10-04. Reconsider if: The Renewables Obligation arrangement after 2028–29; A new Ofgem cap methodology; Government response on levy rebalancing.

    Also on: Energy — one shared record, so its cost is counted once.

  • Action 2A16Policy status: external proposal

    Set an explicit test for whether benefits cover essentials

    An independent advisory body, on the model of the Low Pay Commission, would publish evidence each year on the cost of essentials for set household types and advise on the standard allowance and deductions; ministers and Parliament would still decide.

    Assessment (draft, 6 October review)

    Who decides:
    DWP and HM Treasury (rates and remit), Parliament (any legislation) (Great Britain)
    Evidence:
    Untested proposal. A policy proposal drawing on UK and overseas advisory bodies; no evaluation shows that such a body changes hardship, and the essentials estimates are the proposers’ own modelling.
    Expected effect:
    Direction plausible; size not established.
    Cost and funding

    Not yet costed

    Funding: Not yet costed / funding not identified

    Why it is shortlisted here: Prices stay higher even as inflation falls; a published test of whether benefits cover essentials would show, in advance, how far support keeps pace for the households least able to absorb the rise.

    Builds on the option Targeted cash support for low-income households compared below.

    What it takes
    The problem

    No official benchmark says what the basic rate of Universal Credit is meant to cover; it is set by ministers at the annual uprating review and, for 2026–2030, by a fixed path in legislation, without a published comparison with the cost of essentials.

    Who is affected, and where

    Households on Universal Credit in Great Britain, and people entitled to it who do not claim. Territory: Great Britain. Universal Credit is legislated for Great Britain; Northern Ireland runs a parallel system and Scotland pays some devolved benefits on top (for example the Scottish Child Payment). Equivalent decisions there are not assessed here.

    Policy status

    Proposed by researchers or others, not government policy. A Joseph Rowntree Foundation proposal, not government policy. The Universal Credit Act 2025 (Royal Assent 3 September 2025) already sets the standard allowance on a path that ends 4.8% above inflation-only uprating by 2029–30; that is a fixed path chosen by Parliament, not a test of adequacy, and it is the baseline any option must be compared with.

    The evidence
    What the research found:
    JRF reports that the standard allowance from April 2026 (about £98 a week for a single person aged 25 or over, £154 for a couple) is below its destitution thresholds (£105 and £160) and below the JRF/Trussell estimate of essentials (£120 and £205). It proposes an independent advisory process but does not cost the body or any change in rates.
    Evaluated on:
    Not evaluated. JRF compares 2026–27 Universal Credit rates with its own and Trussell’s estimates of essential costs for a single adult and a couple.; United Kingdom, 2026–27 rates
    Transfer to this case:
    The Low Pay Commission and New Zealand’s advisory group answer different questions; their record is not evidence that a benefits body would reduce hardship.
    Our recommendation (separate from the research):
    Specify the essentials basket, household types and decision rule first, then publish a distributional costing of named options against the 2025 Act baseline. UK Facts does not set its own adequacy threshold; the JRF/Trussell figures are their estimates.
    Strongest counter-evidence:
    An essentials basket is a normative choice, and a published benchmark creates pressure for large recurring spending that must be financed by tax, cuts elsewhere or borrowing; higher basic rates also change work incentives at the margin. JRF itself does not cost the change.
    Effects on record
    • Material hardship among households on Universal Credit: Direction plausible; size not established. plausible spillover, limited confidence; Great Britain. A benchmark changes nothing unless rates change; how much hardship would fall depends on the option, take-up and housing costs, none of which has been modelled here.
    • Recurring benefit spending: A cost or harm; size not established. plausible spillover, limited confidence; Great Britain. Shown as a trade-off, not a benefit. The size depends on the option and has not been costed on the current baseline.
    Cost and funding

    Cost completeness: Not yet costed. Funding: Not yet costed / funding not identified.

    • An independent advisory body on benefit adequacy (secretariat, research, consultation) (administration; paid by central government): Not yet costed. JRF does not cost the body. Comparable bodies (the Low Pay Commission, pay review bodies) are small, but their budgets are not a price for this one.
    • Any change in Universal Credit rates or deductions following the benchmark (household transfer; paid by central government): Not yet costed. Must be modelled on the current caseload, take-up and interactions with housing support, against the Universal Credit Act 2025 baseline. No older campaign price tag is reused.
    Who pays:
    Taxpayers, through higher benefit spending (or cuts elsewhere, or borrowing); DWP for the small administrative cost of an advisory body.
    Financing proposed:
    None. Any rate change would need a recurring tax, spending or borrowing decision matched to a costing on the current caseload and take-up.
    Gap remaining:
    Unknown: it depends entirely on the option chosen. The advisory body is a small administrative cost; rate changes could be large and recurring.
    What delivery needs
    Skills:
    Analysts able to price essentials by household type.
    Operational capacity:
    DWP and HM Treasury modelling of caseloads, take-up and interactions with housing support.
    Infrastructure:
    None beyond existing payment systems.
    Permissions:
    None.
    Law:
    A statutory body or duty would need legislation; a non-statutory panel would not.
    Public consent:
    Agreement on what counts as an essential; public attitudes to benefit spending.
    First step and stages

    First step: Specify the essentials basket, household types and the exact options to cost against the 2025 Act baseline. (owner: DWP with HM Treasury)

    1. Consult on remit, basket and household types — DWP (proposed stage, not an official timetable)
    2. Set up the advisory body and publish a first benchmark — DWP; Parliament if statutory (proposed stage, not an official timetable)
    3. Annual report, with a published government response at the uprating review — Advisory body; DWP ministers (proposed stage, not an official timetable)

    Depends on: A25: higher rates help only people who claim; Housing support (Local Housing Allowance) interacts with any change

    Trade-offs
    Who gains and who loses:
    Gains for households on Universal Credit, largest for those with the least other income; costs fall on taxpayers or on whatever spending is cut. Rates for pensioners and disability benefits are outside this test unless its remit is widened.
    What else the money or effort could do:
    Money for higher rates is not available for services, employment support or debt reduction.
    Strongest counterargument:
    A benchmark turns a political judgement into an apparently technical one and builds in pressure for spending that may not be affordable; uprating already follows a legislated path to 2029–30.
    Risks:
    Basket choices contested as arbitrary; recommendations ignored, eroding trust; higher rates absorbed by rents where housing support is capped.
    How we would judge it
    Baseline:
    Deep material poverty and food insecurity among people in low-income households (DWP Households Below Average Income).
    Leading indicator:
    The published gap between each household type’s rate and the benchmark.
    Outcome:
    Material hardship, food insecurity and income after essential costs; employment and caseload effects alongside.
    Continue, adapt or stop:
    Review the remit if the benchmark is not used in uprating decisions, or if hardship does not change after rates move towards it.
    Sources

    Source published 30 January 2026 (JRF); 2025 (Universal Credit Act); evidence reviewed 2026-10-04. Reconsider if: A government response to an independent adequacy proposal; The next uprating review; A costed JRF/Trussell essentials-guarantee update.

    Also on: Inequality, Benefits — one shared record, so its cost is counted once.

Decision brief

  • Decide who pays the remaining policy costs on electricity bills — and protect households who cannot switch from gas

The leading option set out as a decision someone could take: who decides, who benefits, the best evidence, cost and funding, and the main trade-off. The full research record is one click away.

Decision briefPublic-policy proposalReviewed 2026-10-04

Decide who pays the remaining policy costs on electricity bills — and protect households who cannot switch from gas

Decision required
DESNZ and the Treasury, with Ofgem, re-model three ways of handling the policy costs still on electricity bills — move them to gas bills, move them to general taxation, or leave them and target help through a bigger Warm Home Discount — on today’s tariffs, by heating type and income, and choose one before the Exchequer’s funding of 75% of the Renewables Obligation ends after 2028–29.
Who and where
Households in Great Britain, separated by heating type (electric, gas, off-gas other fuels) and income — with low-income gas households who cannot switch named as the group to protect. Applies in: Great Britain.
Accountable body
Department for Energy Security and Net Zero and HM Treasury; Ofgem for the price-cap methodology
Intervention
Move the remaining policy costs off electricity unit prices (to gas bills or to taxation), or offset them for low-income households with targeted discounts.
Best evidence, and where it applies
Nesta’s 2025 modelling: moving the Renewables Obligation and Feed-in Tariffs to gas bills, with wider bill support, cut bills for about 8 million households and raised them by about £76 a year for gas households not eligible for support (about £20 if other levies also moved to taxation, at about £1.1bn a year). That was before April 2026, when most of the cost already moved to taxation; UKERC now puts remaining policy costs at about a tenth of an electricity bill. Not yet re-modelled.Studied in: Great Britain households by heating type and eligibility for bill support (April–June 2025 Ofgem price cap).How closely the comparison transfers to this decision: France: pilot in Ardèche, Aveyron, Côtes-d’Armor and Pas-de-Calais — partial; Seven low-income communities, New Zealand — partial.
Extra cost of this change
Capital: none identified in the brief.Recurring: Further levy rebalancing from electricity to gas or taxation — Not yet costed; Protection for households who cannot switch from gas — Not yet costed.One-off or mixed: Distributional re-modelling and consultation on the post-April 2026 baseline — not yet established.
Funding
Not funded yet: a possible funding route exists, but nothing is allocated to this change.Committed to this change: none.Possible source, not an award: none identified.Unfunded: Not costed on the current baseline; from 2029–30 the 75% Renewables Obligation share returns to bills unless a new decision is made.
Savings and wider benefits
Not yet specified: no cashable saving or avoided cost has been costed for this change. Expected outcomes are listed one by one in the research appendix and are never added together or counted as money available.
First 90-day step
DESNZ and Ofgem publish distributional modelling of the three designs on post-April 2026 tariffs, by heating type and income decile.The proposed first milestone; a 90-day date is not yet specified. Owner: DESNZ with Ofgem. Proposed by UK Facts, not an official deadline.
Twelve-month milestone
Not yet specified.Time to a first useful result: Modelling within months; bill effects from the first price-cap period after any change; heat-pump uptake over several years.
Outcome, and when to scale or stop
Measure: The unit price ratio and heat-pump installations each quarter; Warm Home Discount receipt among eligible low-income gas households.Scale if: Electric heating becomes cheaper to run relative to gas and heat-pump uptake rises, without fuel poverty rising among low-income gas households.Stop if: The design raises fuel poverty overall, or cannot be targeted to protect households who cannot switch.
Main trade-off
Every design moves cost rather than removing it — to gas households, to taxpayers or to other bill-payers — and none of them lowers general inflation, which is the Bank of England’s job.

An editorial proposal by UK Facts for discussion, not government policy. Records: A17 · effects E-A17-HEATPUMP, E-A17-GAS-HOUSEHOLDS · costs C-A17-TRANSFER, C-A17-PROTECTION

Research appendix: study design, effect sizes and limits, alternatives, full costing, international comparisons and how we would know

1.The change, in plain words

Decide who pays the remaining policy costs on electricity bills — and protect households who cannot switch from gas

2.The decision requested

Decision
Commission DESNZ and Ofgem to publish distributional modelling of three specified designs on the post-April 2026 tariff baseline, by heating type and income decile, with compensation options; consult; and take the decision together with the Treasury’s decision on the Renewables Obligation funding after 2028–29.
Accountable institution
Department for Energy Security and Net Zero and HM Treasury; Ofgem for the price-cap methodology
Geography
Great Britain
Powers
Levy schemes are set in legislation (the Renewables Obligation orders, Feed-in Tariffs and Warm Home Discount regulations); moving costs between fuels or to taxation needs secondary legislation or a fiscal decision, and Ofgem changes to the cap methodology and supplier licences. Exchequer funding needs a Budget decision.
Delivery partners
Ofgem; Energy suppliers (billing and Warm Home Discount payments); DWP (data matching for targeted support); Citizens Advice and fuel-poverty charities; HM Treasury (fiscal decision)

3.Who it is for, and what changes beyond today

Target population
Households in Great Britain, separated by heating type (electric, gas, off-gas other fuels) and income — with low-income gas households who cannot switch named as the group to protect.
Eligibility
Bill changes apply to every domestic customer of the fuel concerned; targeted support (design C and the compensation in design A) to low-income households identified through benefit and property data.
Scale
National by nature, because levies are recovered from every bill. No new delivery scale is chosen: the decision is about who pays a fixed set of costs.
Baseline
Since April 2026 the Exchequer has funded 75% of the domestic Renewables Obligation for 2026–27 to 2028–29 (£2.58bn in 2026–27) and the Energy Company Obligation is no longer funded through bills after March 2026 — about £150 off the average household’s bills, or £134 off the typical dual-fuel price cap (Budget 2025). Policy costs are now about a tenth of a typical electricity bill (£90 in April–June 2026, against £298 wholesale and £252 networks; UKERC). In Oct–Dec 2026 the cap’s unit rates are 26.32p per kWh for electricity and 7.97p for gas, a ratio of 3.3 to 1, and the typical dual-fuel cap is £1,723 a year (Ofgem). 9.4% of households in England were fuel poor in 2025. CPI inflation was 3.5% in September 2026, against the 2% target (ONS).

Source: HM Treasury, Budget 2025 (HC 1492) (Para 2.4, footnote 77; Table 4.1 line 1); UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (“Bills post-Budget” (p.15)); Ofgem, Energy price cap (default tariff) levels — Annex 9, levelised cap levels (Annex 9, unit rates and sheet 1c); Department for Energy Security and Net Zero, Annual Fuel Poverty Statistics in England, 2026 (2025 data) (Report p.1); Office for National Statistics, Consumer price inflation, UK: September 2026 (Series D7G7)

Change beyond existing law or funding
Budget 2025 already moved 75% of the domestic Renewables Obligation to taxation, but only to 2028–29, and stopped funding the Energy Company Obligation through bills after March 2026. The added decision is what happens to the costs still on electricity bills (the remaining quarter of the Renewables Obligation, Feed-in Tariffs, the Warm Home Discount and new nuclear funding) and after 2028–29, chosen from re-modelled designs with protection for those who cannot switch: (A) move remaining levies to gas bills with levy-funded support; (B) move them to general taxation; (C) leave them and expand targeted support (a larger Warm Home Discount plus a unit-rate discount).

4.How it would work

Do: Move the remaining policy costs off electricity unit prices (to gas bills or to taxation), or offset them for low-income households with targeted discounts Changing: a lower electricity-to-gas price ratio (designs A and B), or lower bills for eligible low-income households (design C)

  • Running cost of switching from a gas boiler to a heat pump

    Modelled, not observedEffect record E-A17-HEATPUMP

    Nesta modelled about £400 a year saved by a typical switcher, on April–June 2025 prices; not re-run after the April 2026 changes, so no size is shown. UKERC says a ratio of about 2 to 1 or below is broadly needed for heat pumps to compete with gas.

  • Bills of households that stay on gas

    Modelled, not observedEffect record E-A17-GAS-HOUSEHOLDS

    A harm under design A: about £76 a year more for gas households not eligible for support (about £20 for the 19 million or so such households if other levies also move to taxation, at about £1.1bn a year), while 3.6 million poorer gas households eligible for support saved about £83 (Nesta, April 2025 price cap). Design B shifts the cost to taxpayers instead; design C leaves gas bills unchanged but adds levy-funded support.

  • Fuel poverty among low-income households with electric heating

    Hypothesis to test

    Electrically heated households were twice as likely to be fuel poor (21%) as gas users (10%) in Nesta’s figures; a lower unit price should help them most, but no model on today’s tariffs exists.

  • General inflation

    Hypothesis to test

    Not a benefit of this brief. Moving costs to taxation lowers measured CPI once, for as long as it lasts (Budget 2025 forecast its measures would cut inflation by over 0.2 percentage points in 2026–27); moving them to gas largely reshuffles the energy index. Neither changes underlying inflation, which the Bank of England targets.

Outcomes are kept separate and never added into one impact figure.

5.Best evidence

  • How to make electricity cheaper (position paper) and Options for levy reform (technical report)

    Author or institution:
    Andrew Sissons, Marcus Shepheard, Martina Kavan, Elysia Lucas, Daniel Lewis (Nesta, a charity advocating heat electrification)
    Published:
    5 June 2025
    Evaluation period:
    April–June 2025 Ofgem price cap
    Design:
    Distributional bill model using Ofgem price-cap methodology and consumer archetypes
    Sample or population:
    Great Britain households by heating type and eligibility for bill support
    Effect and uncertainty:
    Moving Renewables Obligation and Feed-in Tariff costs to gas: 4.5 million off-gas households save about £240 a year; 3.6 million poorer gas households save about £83 with support; gas households not eligible for support pay about £76 more (about £20 for some 19 million households in the compound proposal, which also moves other levies to taxation at about £1.1bn a year). Expanded Warm Home Discount (+840,000 households, core budget £514m to £640m) plus a 0.5p/kWh discount (£310m), levy-funded.
    Limits:
    Pre-dates Budget 2025: 75% of the Renewables Obligation it proposes to move is now on taxation to 2028–29, so the sizes are overtaken. Households only; own price and consumption assumptions.

    Where: “The solution: rebalance levies and support households”; “The social tariff”; “Heat pumps become an even more affordable option”; technical report pp.4, 11, 13. Affiliation is provenance, not proof of quality.

  • The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper)

    Author or institution:
    Kaylen Camacho McCluskey, Richard Carmichael, Aidan Rhodes, Rob Gross, Will Blyth (UK Energy Research Centre)
    Published:
    28 July 2026
    Evaluation period:
    Ofgem cap data 2015–16 to April–June 2026
    Design:
    Analysis of price-cap bill components and review of reform options
    Sample or population:
    Typical dual-fuel direct-debit household, Great Britain
    Effect and uncertainty:
    Policy costs fell by £88 (51%) from the 2025–26 average to April–June 2026, to about a tenth of the electricity bill (£90); wholesale £298 (32%), networks £252. Moving the remaining policy costs to taxation could cut electricity bills by up to 10%.
    Limits:
    A briefing; bill components for a typical household, not by income or heating type; trajectories exposed to gas-price shocks.

    Where: Section 3, “Bills post-Budget” (PDF p.15, printed p.11); Executive summary (PDF p.7); Box 3 (PDF p.19). Affiliation is provenance, not proof of quality.

  • Energy bills support: an update (HC 232, 2023-24)

    Author or institution:
    National Audit Office
    Published:
    14 November 2024
    Evaluation period:
    2022 to March 2024
    Design:
    Value-for-money audit of the energy bills support schemes
    Sample or population:
    All domestic and non-domestic support schemes in Great Britain and Northern Ireland
    Effect and uncertainty:
    Total estimated cost £44bn; the universal Energy Price Guarantee about £24.0bn. Protected most consumers from the extremes, but some support went to consumers who did not need it.
    Limits:
    Costs still being reconciled; the wider economic evaluation was not yet done.

    Where: Conclusions; para 2.2 and Figure 3. Affiliation is provenance, not proof of quality.

6.Alternatives, counter-evidence and who loses

Closest feasible alternative
Keep current policy (75% of the Renewables Obligation on taxation to 2028–29, Warm Home Discount of £150 for about six million households) and put the money into retrofit, which lowers the energy homes need rather than its price (see the national decision brief on /energy).
Strongest counter-evidence
After Budget 2025 policy costs are only about a tenth of a typical electricity bill, while wholesale and network costs are about a third each, so further rebalancing has much less to move than Nesta modelled; and Nesta’s figures are now out of date.

Source: UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (“Bills post-Budget” (p.15)); Nesta, How to make electricity cheaper (position paper) and Options for levy reform (technical report) (Technical report (April 2025 cap basis))

Distributional effects
Design A: gains for electric-heated and heat-pump households, small rises for gas households, many of them tenants who cannot switch. Design B: costs fall on taxpayers by income, so it is more progressive than bills but competes with other spending. Design C: gains concentrated on eligible low-income households, with a levy on all other bill-payers. Lower-income households face higher inflation on essentials in energy shocks: at the October 2022 peak, 13.6% for the second-lowest income tenth against 11.6% for the second-highest (ONS Household Costs Indices).
Main downside
Raising gas prices hits households that cannot change their heating; funding from taxation costs billions a year (the current 75% share alone is about £2.1bn to £2.6bn a year) and stops after 2028–29 unless renewed.

The options compared, including current policy

  • The proposal

    A: move remaining electricity levies to gas bills, with levy-funded protection

    Who is reached
    Electric-heated and heat-pump households gain; gas households pay a little more; low-income gas households protected if support is expanded
    Evidence
    Modelled (Nesta 2025), now overtaken by Budget 2025; re-modelling needed
    Likely outcome and timing
    Lower price ratio from the first cap period after the change; uptake over years
    Cost and funding
    A transfer among bill-payers; not costed on today’s baseline
    Main trade-off
    Gas households who cannot switch, many of them tenants, pay more
  • The proposal

    B: move remaining electricity policy costs to general taxation (beyond 2028–29)

    Who is reached
    All electricity customers; the cost falls on taxpayers
    Evidence
    UKERC: up to 10% off electricity bills; Budget 2025 forecast its partial version cuts CPI by over 0.2 points in 2026–27
    Likely outcome and timing
    Lower bills and a one-off fall in measured inflation for as long as it is funded
    Cost and funding
    Exchequer; the current 75% Renewables Obligation share alone costs £2.58bn in 2026–27; nothing allocated after 2028–29
    Main trade-off
    Billions a year competing with other spending; helps high users as much as the poor
  • The proposal

    C: leave levies, expand targeted help (bigger Warm Home Discount plus a unit-rate discount)

    Who is reached
    Eligible low-income households on any fuel
    Evidence
    Nesta’s illustrative design; France’s income-tested voucher was designed to cover about 90% of the poorest tenth, but about a fifth of vouchers went unused
    Likely outcome and timing
    From the next winter’s scheme year
    Cost and funding
    Levy on all bills; about £126m plus £310m a year on 2025 assumptions, not re-modelled
    Main trade-off
    Does not change the price ratio, so heat pumps stay dear to run
  • Current policy

    Current policy: 75% of the Renewables Obligation on taxation to 2028–29, ECO no longer funded through bills, £150 Warm Home Discount

    Who is reached
    All households (about £150 off the average household’s bills); about six million get the £150 discount
    Evidence
    Official costing (Budget 2025); UKERC bill analysis
    Likely outcome and timing
    In place now; the Renewables Obligation share returns to bills in 2029–30 unless renewed
    Cost and funding
    £2.58bn (2026–27), £2.10bn, £2.20bn from the Exchequer
    Main trade-off
    Time-limited; the price ratio stays at about 3 to 1 or more
  • Alternative

    Monetary policy: Bank of England interest rates

    Who is reached
    The whole economy; borrowers pay more, savers gain
    Evidence
    Bank explainer: higher rates cannot stop imported energy shocks, only limit knock-on effects, and take up to two years
    Likely outcome and timing
    Brings inflation back towards the 2% target, usually within two years; slows price rises rather than reversing them
    Cost and funding
    No fiscal cost; costs fall on borrowers and output
    Main trade-off
    Controls general inflation but does not protect any household from today’s higher price level
  • Alternative

    Universal bill relief, as in the 2022–23 Energy Price Guarantee

    Who is reached
    Every household, whatever its income
    Evidence
    NAO audit: protected most consumers, but some support went to those who did not need it
    Likely outcome and timing
    Immediate, for as long as it is paid
    Cost and funding
    About £24.0bn for the Energy Price Guarantee, within £44bn of support in 2022–24 (DESNZ estimate)
    Main trade-off
    Very costly and poorly targeted; lowers measured inflation only while it lasts
  • Alternative

    Targeted income support: an essentials test for Universal Credit rates

    Who is reached
    Households on Universal Credit who claim, whatever their heating fuel
    Evidence
    Untested proposal; see the decision brief on /inequality
    Likely outcome and timing
    From the first uprating that moves awards; protects against the price level, does not lower inflation
    Cost and funding
    Not costed; recurring Treasury cost; nothing allocated
    Main trade-off
    Recurring cost; misses eligible people who do not claim
  • Alternative

    Retrofit cold, inefficient homes first

    Who is reached
    Low-income households in the least efficient homes (England)
    Evidence
    See the national decision brief on /energy: measured gas savings after wall insulation
    Likely outcome and timing
    Lower energy use after each home is treated; years to reach many homes
    Cost and funding
    Warm Homes Plan grants allocated at programme level
    Main trade-off
    Slow and needs the same installers as heat pumps

7.What other countries or the devolved nations show

Country lesson · France: pilot in Ardèche, Aveyron, Côtes-d’Armor and Pas-de-Calais, Pilot 2016–2017; national from 1 January 2018

An income-tested energy voucher in France that pays towards any heating fuel

Evidence: Observational analysisPartial match: some conditions differ

What was changed
The chèque énergie: a voucher sent automatically to households below an income ceiling (€7,700 a year per consumption unit), worth more for poorer and larger households (average €150), usable for electricity, gas, heating oil, wood or efficiency work. It replaced electricity and gas social tariffs, which only helped households on those fuels.
Study design and population
Government evaluation of the pilot reported to Parliament: administrative take-up and targeting data with beneficiary and business surveys. No comparison group; no measure of hardship. About 170,000 low-income households a year in four départements.
Measured outcome there
77.9% of 2016 vouchers were used by September 2017 (about 22% non-take-up); more households were helped than under the social tariffs (134,997 against 131,190); the eligibility rule covered about 90% of the poorest tenth against 74% under the social tariffs; projected administration cost 1.5% of the budget against 3.9% for the social tariffs.
Cost status
Historic: a €600m aid envelope projected for national roll-out, plus administration (about €8.9m a year projected). Not a price for a UK scheme.
What failed or remains uncertain
About one voucher in five went unused — some never arrived, were lost or not understood; the evaluation did not test whether the voucher reduced cold homes, arrears or hardship; a flat voucher does not change the price ratio between electricity and gas.
Why the UK differs
The UK’s Warm Home Discount is a bill rebate through suppliers using benefit and property data; French eligibility uses household tax returns, which the UK has no single equivalent of; heating fuels and tariffs differ.
First change required here
Before choosing between a rebate, a unit-rate discount and levy changes, test whether existing data can identify low-income households by heating type (including off-gas homes) and measure non-receipt as well as take-up.

Not a UK forecast: the effect above was measured in that place and population. Source: Ministère de la Transition écologique et solidaire (France), Évaluation de l’expérimentation du chèque énergie (rapport au Parlement, NOR TRER1729569X) (Parts I–V). Reviewed 2026-10-04.

Country lesson · Seven low-income communities, New Zealand, Winters of 2001 and 2002

Insulating cold, damp homes in New Zealand

Evidence: Experimental or quasi-experimental evaluationPartial match: some conditions differ

What was changed
A free, standard retrofit package to government specification — ceiling insulation, draught stopping round windows and doors, insulating paper under floors and a polythene moisture barrier on the ground — installed by trained community teams.
Study design and population
Community-based cluster randomised study, single-blinded (inspectors and interviewers did not know which homes were insulated). 1,350 uninsulated households (4,407 people) where at least one member had respiratory symptoms; two thirds in the three most deprived tenths of areas.
Measured outcome there
Warmer, drier homes (bedrooms +0.5°C; humidity −2.3%) while using 81% of the energy of uninsulated homes. Odds of fair or poor self-rated health halved (OR 0.50, 0.38 to 0.68); fewer children off school (0.49) and adults off work (0.62); fewer GP visits (0.73).
Cost status
Historic only: about £700 a house excluding taxes at 2001 prices — not a guide to current English costs.
What failed or remains uncertain
Respiratory hospital admissions fell but not significantly (OR 0.53, 0.22 to 1.29); most outcomes were self-reported by occupants who knew their homes were insulated; temperature gains were small and partly taken as lower energy use.
Why the UK differs
English stock is largely brick and solid-wall, much already has loft insulation, and the climate is colder; English schemes treat whole homes under PAS 2035 at much higher cost. The trial chose households with respiratory illness, so health gains for a general fuel-poor population are less certain.
First change required here
Select homes by health need as well as income and energy rating — for example through GP or respiratory-service referral — and measure warmth, energy use, bills and health separately against a comparison group.

Not a UK forecast: the effect above was measured in that place and population. Source: BMJ, Effect of insulating existing houses on health inequality: cluster randomised study in the community (Abstract; Methods; Discussion). Reviewed 2026-10-04.

8.What delivery needs first

  • data — Linked data on heating type, consumption and income (and off-gas homes) to model winners and losers, and to target support without relying only on benefit receipt. (Scarce resource shared with other priorities; owner: DESNZ with DWP and Ofgem)
  • law — Secondary legislation to change how levy schemes are recovered, or a Budget decision to fund them from taxation after 2028–29. (Genuine veto: nothing proceeds without it; owner: DESNZ; HM Treasury; Parliament)
  • procurement — Ofgem changes to the price-cap methodology and supplier licence conditions; supplier billing changes. (Requirement; owner: Ofgem; energy suppliers)
  • staff — Heat-pump installers, so households can respond to cheaper electricity — the same workforce the retrofit programme needs. (Scarce resource shared with other priorities; owner: DESNZ (skills); MCS-certified installers)
  • public consent — Gas households accepting higher bills (design A), or taxpayers funding levies (design B). (Requirement; owner: DESNZ and HM Treasury)

9.What it would cost

How the cost is built up: Design A: remaining electricity levies moved to gas + levy-funded targeted support (a transfer among bill-payers). Design B: remaining electricity levies × years funded from taxation (an Exchequer cost). Design C: expanded Warm Home Discount + unit-rate discount, recovered from all bills. Plus modelling and administration. The designs are alternatives; their costs are never added together.

  • Further levy rebalancing from electricity to gas or taxation

    Great Britain household bills

    Not yet costed (ledger C-A17-TRANSFER)

    recurring; price year not stated; Each year after the change; Not yet established

    A transfer between bill-payers or to taxpayers, not a saving. For scale only: the Exchequer cost of funding 75% of the domestic Renewables Obligation is £2,580m in 2026–27 (Budget 2025); the remaining quarter is not separately costed.

    Source: UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (p.15)

  • Protection for households who cannot switch from gas

    Low-income gas-heated households

    Not yet costed (ledger C-A17-PROTECTION)

    recurring; price year not stated; Each year after the change; Not yet established

    Nesta’s illustrative design (about £126m more for the Warm Home Discount core budget and £310m for a unit-rate discount, 2025 assumptions) is not re-modelled, so not shown as a cost.

    Source: Nesta, How to make electricity cheaper (position paper) and Options for levy reform (technical report) (“The social tariff”)

  • Distributional re-modelling and consultation on the post-April 2026 baseline

    Three designs, by heating type and income decile, with compensation options

    Not yet established per modelling exercise

    one-off revenue; price year not stated; Before the 2028–29 decision; Not yet established

10.Who pays, and what is missing

Programme envelope (a possible route, not an award)
None identified
Allocation committed to this change
None
Remaining gap
Not costed on the current baseline; from 2029–30 the 75% Renewables Obligation share returns to bills unless a new decision is made.
Proposed financing
Designs A and C are financed by bill-payers through levies (a transfer, not new money); design B needs a Treasury decision on tax, spending or borrowing. The current Exchequer funding of 75% of the Renewables Obligation stops after 2028–29. Nothing is allocated to any design.
Responsible payer
bill-payers, central government
Budget displaced
Design B: other spending or tax cuts, at a scale of billions a year. Designs A and C: household budgets of the bill-payers who pay more.

11.First milestone and time to a useful result

DESNZ and Ofgem publish distributional modelling of the three designs on post-April 2026 tariffs, by heating type and income decile. (Owner: DESNZ with Ofgem. Proposed by UK Facts, not an official deadline.)

Time to first useful result: Modelling within months; bill effects from the first price-cap period after any change; heat-pump uptake over several years.

What could delay it: Data linking heating type and income are available to DESNZ The Treasury decides the post-2028–29 Renewables Obligation arrangement in time for Ofgem to change the cap Wholesale gas prices do not swing so far that the baseline must be re-run Installer capacity grows enough for households to respond

12.How we would know

Baseline
Electricity-to-gas unit price ratio in the cap; annual bills at matched consumption by heating type and income decile; fuel poverty by main heating fuel; heat-pump installations.
Comparison
The current-policy path (including the return of the 75% share to bills in 2029–30, unless changed), modelled on the same tariffs; observed outcomes before and after each cap period that implements the change.
Leading indicator
The unit price ratio and heat-pump installations each quarter; Warm Home Discount receipt among eligible low-income gas households.
Follow-up
Annual fuel poverty statistics by heating fuel; bills by income decile; heat-pump uptake over three to five years.
Continue if
Electric heating becomes cheaper to run relative to gas and heat-pump uptake rises, without fuel poverty rising among low-income gas households.
Adapt if
Low-income gas households’ bills or fuel poverty rise: widen or deepen the targeted support before the next stage.
Stop if
The design raises fuel poverty overall, or cannot be targeted to protect households who cannot switch.
Thresholds
Not yet set: Numerical levels need the re-modelled baseline and a published impact assessment; none exists on today’s tariffs.

What is not yet known, and how to find out

  • What does each design cost, and who gains and loses, on today’s tariffs? (cost)Next step: Re-run the distributional model for designs A, B and C on the latest cap, net of the Budget 2025 changes.Scope: All Great Britain households, by heating type and income decile, each year to 2030–31 · Data or quotes needed: Current levy costs by scheme; cap unit rates; consumption by heating type and income; Warm Home Discount eligibility data · Who can estimate it: DESNZ analysts with Ofgem; HM Treasury for the Exchequer cost of design B
  • How much would a lower price ratio raise heat-pump uptake in practice? (effect)Next step: Evaluate uptake against the price ratio using the changes already made in April 2026 before modelling further shifts.Defensible route: evaluation of existing delivery
  • Can low-income households be identified by heating type, including off-gas homes, without relying only on benefits? (data)Next step: Test data matching between DWP, property and supplier records for the Warm Home Discount.
  • Which instruments are needed to move each levy, and can they be in force before 2029–30? (legal)Next step: DESNZ legal review of the Renewables Obligation, Feed-in Tariff and Warm Home Discount legislation.

Sources last checked 4 October 2026 · Owner: Evidence editor (James Harris) · Next check: ONS consumer price inflation, UK: September 2026 (21 October 2026) or the first trigger: Ofgem price cap announcement for the next cap period.

More decision briefs on other pages

What it would take

The order things have to happen in, who pays, and the effects and appraisals on record.

The order things have to happen in

  1. First, the prerequisite

    Re-model moving remaining levies off electricity on post-April 2026 tariffs, by heating type and income

    Owner: DESNZ with Ofgem

    No date: the timing depends on the steps before it.

  2. First, the prerequisite

    Specify the essentials basket, household types and options to cost

    Owner: DWP with HM Treasury

    No date: the timing depends on the steps before it.

  3. Then, the decision

    Decide the Renewables Obligation arrangement after 2028–29 and any adequacy body’s remit

    Owner: HM Treasury, DESNZ and DWP; Parliament where law is needed

    No date: the timing depends on the steps before it.

  4. Finally, the measured outcome

    Inflation at the 2% target; lower-income households’ cost pressures and fuel poverty falling

    Owner: Bank of England (target); ONS and DESNZ statistics

    No date: the timing depends on the steps before it.

Who pays, and what is still missing

Cost, committed funding and the remaining gap for the same scope and years. A programme envelope is not an award to a project; a proposal is not committed money. None of these costs has been established yet, so no total is shown.

Cost and funding ledger

  • Further levy rebalancing from electricity to gas or taxation

    A17 · bill transfer · not costed

    Amount
    Not yet costed
    Who pays
    bill-payers, central government
    Committed
    None identified
    Proposed, not committed
    —
    Gap
    Not established
  • Protection for households who cannot switch from gas

    A17 · bill transfer · partial

    Amount
    Not yet costed
    Who pays
    bill-payers
    Committed
    None identified
    Proposed, not committed
    —
    Gap
    Not established
  • An independent advisory body on benefit adequacy (secretariat, research, consultation)

    A16 · administration · not costed

    Amount
    Not yet costed
    Who pays
    central government
    Committed
    None identified
    Proposed, not committed
    —
    Gap
    Not established
  • Any change in Universal Credit rates or deductions following the benchmark

    A16 · household transfer · not costed

    Amount
    Not yet costed
    Who pays
    central government
    Committed
    None identified
    Proposed, not committed
    —
    Gap
    Not established

“Not yet costed” means no defensible cost has been found — not that the action is free. Lifetime benefits, benefit-cost ratios and forecast savings are never shown here as money available to spend.

Effects on record, with evidence ratings (4 records)

What the evidence says each action changes

Effects on record — these measure different outcomes, so they are not drawn on one scale
ActionOutcome and areaEffectCompared withEvidence
Make electricity pricing support cheaper clean heatingRunning cost of switching from a gas boiler to a heat pump Energy and billsDirection plausible; size not established—modelled; limited confidence; Great BritainNesta modelled a saving of about £400 a year for a typical switcher, on 2025 prices before 75% of the Renewables Obligation moved to taxation; not re-run on today’s baseline, so no size is shown.
Make electricity pricing support cheaper clean heatingBills of households that stay on gas Energy and bills · harmSize not established—modelled; limited confidence; Great BritainNesta put the rise at about £76 a year for gas households not eligible for support (about £20 for some 19 million households only if other levies also move to taxation, at about £1.1bn a year), modelled on the April 2025 price cap; households that cannot switch — many tenants — bear it. Corrected 4 Oct 2026 (was “about £20 before compensation”).
Set an explicit test for whether benefits cover essentialsMaterial hardship among households on Universal Credit Poverty and inequalityDirection plausible; size not established—plausible spillover; limited confidence; Great BritainA benchmark changes nothing unless rates change; how much hardship would fall depends on the option, take-up and housing costs, none of which has been modelled here.
Set an explicit test for whether benefits cover essentialsRecurring benefit spending Public finances and tax · harmSize not established—plausible spillover; limited confidence; Great BritainShown as a trade-off, not a benefit. The size depends on the option and has not been costed on the current baseline.

How we would know

CPI inflation, 12-month rate; CPI price level; Annual inflation for the second-lowest income tenth (Household Costs Indices).

The outcome measures to watch. A baseline is where we start, not a target; where there is no official target we say so.

Where the ideas come from

Research, counter-evidence and methods (10 sources; 1 claim held back)
  • Monetary policy remit: Budget 2025 — HM Treasury, 2025-11-26.Official remit letter; United Kingdom. Relevant passages checked, 2026-10-04.
  • How do higher interest rates help to lower inflation? — Bank of England, 2023-05-11 (last updated).Official explainer of the monetary-policy mechanism; United Kingdom. Full text checked, 2026-10-04. Limits: An explainer framed around the 2022 energy and food shock; it does not discuss broad fiscal stimulus.
  • Regulating water, energy and broadband to protect consumers in vulnerable circumstances — National Audit Office, 2026-06-10.Official audit; Sector-specific: England and Wales, Great Britain and United Kingdom. Relevant passages checked, 2026-10-11. Limits: Audit of consumer regulation, not an estimate of CPI inflation or the causal effect of a specific tariff reform. Regulatory jurisdictions differ by sector.
  • Consumer price inflation, UK: September 2026 — Office for National Statistics, 21 October 2026.Official statistics; United Kingdom. Relevant passages checked, 2026-10-04.
  • Household Costs Indices for UK household groups: April to June 2026 — Office for National Statistics, 28 August 2026.Official statistics in development; United Kingdom. Relevant passages checked, 2026-10-04.
  • The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) — UK Energy Research Centre (Kaylen Camacho McCluskey, Richard Carmichael, Aidan Rhodes, Rob Gross, Will Blyth), 2026-07-28.Analysis of Ofgem price-cap bill components, 2015–2026, and a review of reform options; Great Britain. Relevant passages checked, 2026-10-04. Limits: Distinguishes wholesale, network and policy costs; use scenarios and trade-offs rather than promising that one market reform will instantly cut all bills.
  • Independent process to ensure Universal Credit covers essential costs (briefing) — Joseph Rowntree Foundation (Iain Porter, Isobel Richardson), 2026-01-30.Policy briefing with UK and international precedents; United Kingdom. Full text checked, 2026-10-04. Limits: Does not cost an advisory body or any rate change; essentials estimates are the proposers’ modelling. Makes no claim about savings targets and error.
  • Monetary Policy Summary and Minutes, September 2026 — Bank of England, 2026-09-17.Official monetary policy assessment; United Kingdom. Relevant passages checked, 2026-10-11. Limits: Dated policy judgement and conditional outlook, not measured future inflation or a guarantee about the next interest-rate decision.
  • How to make electricity cheaper (position paper) and Options for levy reform (technical report) — Nesta (Andrew Sissons, Marcus Shepheard, Martina Kavan, Elysia Lucas, Daniel Lewis), 2025-06-05.Policy paper with levy modelling on Ofgem consumer archetypes, plus polling (n=4,000); Great Britain. Relevant passages checked, 2026-10-04. Limits: Uses its own 2025 price and consumption assumptions; the summary and body disagree slightly on the price ratio (4.1 vs 3.9) and the number of poorer gas households (3.5m vs 3.6m). The Budget 2025 move of 75% of the Renewables Obligation to taxation since April 2026 changes the baseline.
  • Universal Credit Act 2025 (c. 22) — legislation.gov.uk, 2025-09-03 (Royal Assent).Legislation; Great Britain. Relevant passages checked, 2026-10-04.

Counter-evidence and criticism

  • Make electricity pricing support cheaper clean heating: After Budget 2025 policy costs are about a tenth of a typical bill, so further rebalancing has less to move; networks are about a third. (UK Energy Research Centre)
  • Set an explicit test for whether benefits cover essentials: An essentials basket is a normative choice, and a published benchmark creates pressure for large recurring spending that must be financed by tax, cuts elsewhere or borrowing; higher basic rates also change work incentives at the margin. JRF itself does not cost the change. (Joseph Rowntree Foundation)

Claims held back

  • Poorly designed broad stimulus can worsen the trade-offs (brief threat, cited to S34) — The Bank’s explainer supports the point about energy and food shocks but does not discuss broad fiscal stimulus. Needed: A Bank of England or OBR assessment of the inflation effect of a specified fiscal measure.

“Full text checked” means we read the report itself; “relevant passages” means the sections behind each figure; “summary or abstract only” means we could not read the full study, so no number from it is published here without another source.

Other options compared — not on the shortlist (4)

Other options compared

Options from earlier work on this page that are not on the shortlist. They remain valid choices; their evidence is shown as before.

  • structuralStatus: operating

    Interest rates set to return inflation to 2%

    Aims to:
    Inflation back at 2% sustainably, so that pay and savings are not eroded by fast price rises.
    How:
    Higher Bank Rate raises borrowing costs and the exchange rate, cools spending and hiring, and lowers inflation expectations; lower rates do the reverse.
    Who decides:
    Bank of England Monetary Policy Committee (operationally independent); the Chancellor sets the 2% target in the annual remit.
    Main constraint:
    Long and variable lags; cannot offset a supply shock without costing output and jobs.
    Evidence:
    Moderate evidence — evaluated, with limits on scope or transfer
    See the trade-offs and evidence
    What the evidence shows
    Well studied but uncertain in size. A Bank of England review (2024) reports that, averaging 1997–2019, a one-point surprise rise lowered the price level by about 0.3% (peaking after about a year), reduced GDP by about 1.3% (after about two years) and raised unemployment by about 0.5 points; other studies range from −0.3% to −1.5% on prices. Historical relationships may not hold for an energy shock.
    Resources
    No Exchequer budget; Bank of England analysis and market operations.
    Consent and decisions needed
    Delegated to the MPC by the Bank of England Act 1998; Parliament could change the remit, not individual decisions.
    Time
    Effects build over one to two years.
    Cost and yield
    No direct spending, but higher rates raise government debt-interest costs and mortgage payments, and lower output for a time.
    Trade-offs and who pays
    Borrowers and mortgagors pay more; savers gain; unemployment rises for a time. Acting too late lets expectations rise; too hard risks recession.
    How we would know it worked
    Leading indicator: Services inflation and pay growth easing towards rates consistent with 2%. Outcome: CPI at 2% over the medium term. It would not be working if: Inflation stays well above target with rates held high and no new supply shock to explain it.
  • immediate reliefStatus: external option

    Capping household energy prices in a shock

    Aims to:
    A lower peak in household energy bills — and in measured inflation — during a wholesale price spike.
    How:
    Government pays suppliers to hold unit rates below the regulated cap, as the Energy Price Guarantee did from October 2022. Because CPI records the price households pay, measured inflation falls too.
    Who decides:
    DESNZ and HM Treasury (design and funding); Ofgem (price cap); energy suppliers (delivery).
    Main constraint:
    Untargeted unless designed otherwise: help per household rises with energy use, so better-off, high-use households gain most in cash terms.
    Evidence:
    Moderate evidence — evaluated, with limits on scope or transfer
    See the trade-offs and evidence
    What the evidence shows
    The Bank of England judged in September 2022 that the Energy Price Guarantee would lower and bring forward the inflation peak, to just under 11% in October, but would add to demand pressure. The final DESNZ evaluation (November 2025) finds that the combined support schemes helped households maintain energy use and limit hardship. Universal eligibility prevented a control-group comparison: it combines modelled counterfactuals, contribution analysis and survey/qualitative evidence. It does not isolate EPG’s causal effect or quantify the net inflation effect after indirect demand effects.
    Policy status
    The Energy Price Guarantee and Energy Bills Support Scheme were temporary 2022–23 measures and have ended.
    Resources
    Large, uncertain Exchequer cost that rises with wholesale prices.
    Consent and decisions needed
    Fiscal event and legislation (the Energy Prices Act 2022 provided the powers).
    Time
    Immediate on bills; ends when the support ends.
    Cost and yield
    Depends on wholesale prices; open-ended exposure is the main fiscal risk. No figure is given here.
    Trade-offs and who pays
    Lower measured inflation now, but more demand, more borrowing, and weaker incentives to cut use.
    How we would know it worked
    Leading indicator: Unit rates paid versus the cap. Outcome: Household energy arrears and fuel poverty during the shock. It would not be working if: Arrears and fuel poverty rise as much as without support.
  • immediate reliefStatus: external option

    Targeted cash support for low-income households

    Aims to:
    Low-income households can pay for essentials during a price shock without falling into arrears or debt.
    How:
    Lump-sum payments through the benefits system (as with the Cost of Living Payments of 2022–2024) top up income while prices are high. They lower household bills relative to income; they do not lower the inflation rate.
    Who decides:
    HM Treasury (budget) and DWP (delivery through benefit records); HMRC for tax-credit claimants.
    Main constraint:
    Flat payments miss people outside the benefits system and cannot match payments to need (household size, energy use).
    Evidence:
    Limited evidence — plausible mechanism, little direct evaluation
    See the trade-offs and evidence
    What the evidence shows
    The DWP evaluation of the 2023–24 payments found most recipients spent at least some of the money on energy bills and many said it helped them avoid borrowing, but that payments were “imperfectly targeted” and quickly absorbed by those with the highest essential costs. It relied on recipients’ own reports and had no comparison group.
    Policy status
    The 2022–2024 Cost of Living Payments have ended; a new scheme would need a fresh fiscal decision.
    Resources
    Exchequer money; DWP payment systems (already in place, which is why payments could be made quickly).
    Consent and decisions needed
    A Budget decision by the Chancellor; competes with other spending and borrowing limits.
    Time
    Weeks to months once announced, because DWP already holds the payment details.
    Cost and yield
    Scales with the number of recipients and the payment size; no current official costing because no scheme is proposed.
    Trade-offs and who pays
    Adds to demand while inflation is high (the Bank of England made the same point about energy support in 2022); borrowing or other spending must cover it.
    How we would know it worked
    Leading indicator: Share of eligible households paid within the target window. Outcome: Arrears, food-bank use and material deprivation among recipients during the shock. It would not be working if: Deprivation and arrears rise as much among recipients as among similar non-recipients.
  • preventionStatus: operating

    Cheaper, more secure supply: energy and competition

    Aims to:
    Smaller price shocks in future, especially for energy and food.
    How:
    Less dependence on imported gas (more domestic generation, storage and insulated homes) and effective competition in essential markets limit how far a global shock feeds into bills.
    Who decides:
    DESNZ, Ofgem and network operators (energy); the Competition and Markets Authority (markets).
    Main constraint:
    Grid connection and construction timelines; global commodity prices still pass through.
    Evidence:
    Limited evidence — plausible mechanism, little direct evaluation
    See the trade-offs and evidence
    What the evidence shows
    The Competition and Markets Authority found in 2023 that high grocery inflation had not been driven, at an aggregate level, by weak competition between retailers — that aggregate finding does not rule out problems in particular markets. Its February 2025 infant-formula study identifies information and competition problems and recommends changes; recommendations are not measured consumer savings. Evidence that energy supply changes would have damped the 2022 shock is modelled rather than evaluated.
    Policy status
    Energy policy is covered in detail on the energy pages.
    Resources
    Capital investment in generation, networks and retrofit; regulator capacity.
    Consent and decisions needed
    Planning permission for infrastructure; how costs are recovered through bills or taxes.
    Time
    Years to decades.
    Cost and yield
    Large capital costs recovered over decades through bills or taxes; no single costing.
    Trade-offs and who pays
    Up-front costs on bills now for resilience later.
    How we would know it worked
    Leading indicator: Share of electricity not set by gas prices; homes insulated. Outcome: Smaller CPI energy swings in the next wholesale shock. It would not be working if: The next gas price spike passes through to bills as fully as in 2022.
The options side by side
OptionResourcesTimeEvidenceOutcome to watch
Interest rates set to return inflation to 2%No Exchequer budget; Bank of England analysis and market operations.Effects build over one to two years.moderateCPI at 2% over the medium term.
Capping household energy prices in a shockLarge, uncertain Exchequer cost that rises with wholesale prices.Immediate on bills; ends when the support ends.moderateHousehold energy arrears and fuel poverty during the shock.
Targeted cash support for low-income householdsExchequer money; DWP payment systems (already in place, which is why payments could be made quickly).Weeks to months once announced, because DWP already holds the payment details.limitedArrears, food-bank use and material deprivation among recipients during the shock.
Cheaper, more secure supply: energy and competitionCapital investment in generation, networks and retrofit; regulator capacity.Years to decades.limitedSmaller CPI energy swings in the next wholesale shock.

Plan reviewed 2026-10-11. How we judge evidence.