The government is consulting on plans that would shift funding for the Warm Home Discount scheme, which would benefit those who don’t use a lot of energy including low income households
18:00, 08 Dec 2025Updated 19:55, 08 Dec 2025
Martin Lewis said shift in Warm Home Discount was a ‘baby step’ but still welcome(Image: ITV)
Millions of households are set to save an extra £39 a year on their energy bills under proposals to shift how the Warm Home Discount is funded.
The government has launched a consultation that would move the cost from the standing charge element of bills onto the unit rate that customers pay for energy instead. Doing so would especially benefit those who don’t use a lot of energy, including low income households who struggle to afford to heat and light their homes. The consultation ends on January 6.
Consumer champion Martin Lewis hailed the proposal, adding: “This is exactly the right direction.”
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The way the Warm Home Discount is funding will switch under government proposals (Image: Getty Images)
The Government-run Warm Home Discount scheme provides a one-off £150 discount on electricity bills for eligible low-income and vulnerable households during the winter months. It has been expanded by around 2.7m households to an estimated six million in total for this winter.
The costs are recovered by suppliers through the standing charge, a fixed daily fee applied to all customers regardless of energy usage. Under the proposal, the cost would be moved to the unit rate, the per-kilowatt charge for electricity and gas, from next April.
It is understood most households would be better from the switch, including 60% of low income households who don’t consume much energy. But those who are higher energy users – and so impacted by the move to the unit charge – would be hit, including households who charge their electric car at home
Yet at the same time as this is happening, the government’s promised £150 a year saving on the average energy bill will come into force under measures announced in the Budget to end the Energy Company Obligation and to shift funding for the Renewables Obligation to general taxation. Taken together, the government says there would be reductions in costs by up to £395 lower for high use households reliant on electric storage heating.
Martin Lewis has branded standing charges a “moral hazard”(Image: ITV)
Moneysavingexpert.com founder Mr Lewis, writing on social media, said: “Overall, assuming all else stays equal (which it won’t, as I’ve written before), this means the standing charge should fall, and the unit rate should still fall too, because the added cost from this shift is smaller than the reduction from removing the policy costs.”
He went on: “The current standing charge is a moral hazard that disincentivises lower usage and keeps bills high for people who use very little energy. It’s the biggest single cause of complaint I get about energy bills, by a mile. Paying £300+ a year simply for the facility of having energy is too much. It also penalises older people who don’t use gas in the summer yet still pay for it every day. I’ve pushed on this for years, and it’s good to finally see some (albeit small) movement.”
The government’s consulation suggests 16.5 million households will be better off thanks to the shift, including 2.8 million low income households. But 12 million households will be worse off from the single measure alone. Once the £150 worth of Budget measures are factored in, they would still be £138 a year better off, it says.