Energy bills set to fall across Britain, with the poorest households benefiting the most

On Wednesday, Ofgem is expected to announce that the energy price cap for Q2 2026 will be nearly £120 lower than current levels. This substantial fall has been driven overwhelmingly by the Government’s energy bill discount, which will deploy £6.9 billion of public spending over the next three years to cut one of families’ biggest bills, according to the Resolution Foundation today (Saturday).

Power cut, the latest analysis from the Foundation, finds that this policy will deliver a clear boost to living standards from April, and should help to keep bills below current levels until at least 2029.

By delivering most of the bill saving by cutting the unit price of electricity, the Government’s package supports the shift to electrification which is essential to meeting the UK’s net zero targets. It also directs the largest cash savings towards households with the biggest bills, such as those with electric heating or larger families.

The analysis reveals that the discount for a typical household will be worth around £135 in 2026-27, but savings will vary. Almost one-in-four (24 per cent, or 6.8 million) will save more than £200.

The report also highlights how the design of the discount means that savings accrue progressively: they are worth twice as much (0.8 per cent) to the bottom two income deciles (as a share of spending) as they are for the top two (0.4 per cent). The Government’s decision to move some policy costs from bills to taxpayers will leave households in the bottom nine income deciles as net beneficiaries. Only those in the highest income decile lose out, on average.

Based on market expectations of the price cap for the rest of 2026, the typical annual energy bill is now expected to be around £1,645 in 2026, more than £200 lower (in real terms) than it was in 2024. However, future pressure from policy and network costs will pull up on bills between this April and April 2029. As a result, the Government’s discount will be eroded over the course of the next three years, leaving bills around £60 lower than today’s levels by March 2029.

The Foundation warns that following this gradual up-tick in bills, an additional cliff edge looms. Once support is withdrawn in April 2029, potentially just ahead of a General Election, bills would rise a further £55. Ministers will then face an uncomfortable choice: allow family energy bills to rise, or find money to extend support.

The Foundation urges the Government not to wait until the eleventh hour to decide. Instead, Ministers should set out a durable framework to balance policy costs between bills and general taxation well ahead of 2029, rather than risk making ad hoc decisions under election pressure.

Jonathan Marshal, Principal Economist at the Resolution Foundation, said:

“Next week’s energy price cap announcement will show a significant drop in households bills, largely because of the Government’s £6.9 billion energy bill discount.

“The policy is well designed. By reducing electricity unit rates it supports the shift towards electrification at the same time as delivering savings worth twice as much to the poorest families as to the richest, as a share of spending.

“However, this support is due to end in April 2029. The Government should set out a clear and durable framework for deciding which energy policy costs are funded by bills and which through taxation soon, to avoid scrambling for a solution in an election year.”