Lib Dems propose energy price discounts for all households

The Liberal Democrats have unveiled a new energy policy which would give all households a basic allowance of energy at a discounted price.

Those with the greatest need would receive an extra allowance of cheap energy and are forecast to save an average of £140 a year, compared to £100 for the majority of households.

Lib Dem deputy leader Daisy Cooper said the policy was designed to end the "national scandal where millions can't afford the most basic energy they need".

The government has taken steps in an attempt to reduce energy bills and is also considering further help for "those who need it most".

Cooper said the "Essential Energy Guarantee" was based on the principle that "every household should be able to afford energy".

Under the scheme every household would receive an "Essential Energy Allowance", which would provide "enough to get by" and be charged at a discounted price.

There would be an extra allowance for families with more children.

Households that need more help, such as those on the lowest incomes, or with extra needs such as charging an electric wheelchair or a home ventilator, would receive a "discount on all their energy".

Cooper said her party estimated it would mean a saving of £100 a year on average for every household, with the poorest 20% of families saving an average of £140 a year. Those in the most need would see the biggest benefits.

She said the plan would lead to longer-term savings for the state as the cost to the NHS alone of dealing with the consequences of people living in cold and draughty houses was £1bn a year.

It would be funded by the Liberal Democrats ordering the energy regulator Ofgem to "claw back" an estimated £5bn in extra profits they believe energy firms will make by 2028.

Cooper said domestic energy suppliers "operate as total monopolies" and her party believed the regulator should "force energy companies to pay back" what she said were windfall profits and not the product of investments they had made.

The Liberal Democrats also want families on low incomes to be able to insulate their home and install heat pumps for free.

They want to remove green levies on household energy bills and instead have a targeted windfall tax on banks, and to "break the link" between electricity and gas prices and invest in more renewable generation.

The party says these measures together with the new "Energy Guarantee" could save £900 a year from average bills by 2035.

Wholesale oil and gas prices have risen in the wake of the war in Iran. It means the energy price cap, which fixes the maximum amount customers on a standard variable tariff can be charged, will rise from 1 July.

The government removed green levies from bills in April, transferring the cost to general taxation instead, and saving an average of £150 a year off bills.

In April, Chancellor Rachel Reeves said further help, which could come later in the year, would not be given to all but would be based on household income and it would be "targeted at those who need it most".

The Conservatives have called on the government to remove VAT from household energy bills for the next three years to help ease the cost of living.

Reform UK has also promised to scrap VAT and green levies on household energy bills if the party were to win power.

The Green Party has called on the government to ensure there would be no rise in prices in July.

They believe support for domestic users should be funded by hiking taxes on capital gains, and tightening an existing tax on energy firms' profits.