Andy Burnham's Energy Bill Challenge: A Political Priority

When John Lennon invited people to “imagine,” he had world peace and harmony in mind.

Andy Burnham has a simpler task: Take several quid off your energy bills.

“Imagine,” the Makerfield MP and presumptive prime minister said in a major speech Monday, “if we could bring down the cost of energy for people and business and the good things that would come from that.”

Such a prominent mention of energy bills in the denouement of Burnham’s only big policy speech so far reflects the political salience of the issue. Brits pay more than international competitors for energy and prices are set to stay high for some time yet, experts said Tuesday.

Analysts at the forecasting firm Cornwall Insight predict that, despite a fragile peace in the Middle East taking the edge off international gas prices, the average annual U.K. household energy bill this winter will still be £1,849.

That’s only fractionally lower than the cap set this summer, kicking in Wednesday, at £1,862. The summer cap itself represents a 13 percent price rise on the previous quarter, caused largely by the effective closure of the Strait of Hormuz.

It’s a worrying inheritance for a new prime minister trying to inject some optimism into British life. Voters say cost of living pressures are the biggest issue facing the country, and name energy their biggest cost of living concern. High business energy costs continue to spook industry leaders and act as a major drag on economic growth.

In his speech, Burnham hinted he wants to do something about it early in his premiership.

“I heard on doorsteps in Makerfield how people need a bit extra now to help with rising costs [of living],” he said. “I will do my very best to deliver it and, whilst not taking risks with the public finances, will seek to give Britain some breathing space as soon as I can.”

Come on down

Incumbent Prime Minister Keir Starmer came to power on a manifesto promise to bring down energy bills by £300 by 2030. It now falls to Burnham to get bills under control.

There are options, according to the people around him.

Labour-aligned think tanks and some industry groups have argued for all so-called policy costs — which help pay for clean energy projects and for support to low-income households — to be taken off bills and put into taxation.

Starmer, who has long argued the only route to permanently lower bills comes from getting volatile fossil fuels out of the U.K. energy mix, started down this road at last year’s Budget, when his government transferred some of those costs off bills, saving the average household around £150 per year.

“There is a direction of travel that was set at the last Budget, where policy costs paid for by bills — a regressive way of paying for it — were taken into general taxation, a more progressive way of paying for it,” said Mathew Lawrence, director of the Common Wealth think tank, whose ideas are influential in Burnham’s transition team. “That is quite a compelling avenue to reduce bills at source and to pay for them more progressively.”

Lawrence co-authored a report for the Burnham-aligned Mainstream campaign group earlier this year, which promoted the policy as well as recommending cutting the price of energy up to a point deemed to be essential for households.

The Labour MP Miatta Fahnbulleh, a key Burnham adviser who was once an energy minister and before that boss of the left-leaning New Economics Foundation think tank, has called for similar policies in the past.

Burnham may get lucky in ways which eluded Starmer. If peace holds in the Middle East, international oil and gas prices are likely to continue falling, easing inflation at home. Starmer, by contrast, saw the full economic shock of the war hit just as the U.K.’s economic outlook was starting to look rosier.

But there is an urgent need for Burnham to tackle high bills, said Lawrence. Right-wing challengers like Reform UK boss Nigel Farage and Conservative leader Kemi Badenoch argue that ditching climate goals and maxing out fossil fuel production in the North Sea will lower costs.

Those challengers, Lawrence said, have “a compelling narrative,” albeit one he thinks is “detached from the actual mechanics” of energy prices.

“But it has resonance because people are facing higher bills,” he added, “[so] it’s urgent to get on top of, as much as possible.”