Blog – Budget 2026: a series of wrong choices

Budgets are political choices. 

They reveal what governments prioritise, who they choose to support and who they are prepared to leave behind. 

This Budget was billed as a chance to give households breathing space through another difficult winter. With energy bills set to rise again in January 2027 to a level that is around 70% higher than before the energy crisis began in 2021, millions of households need meaningful support now. 

Instead, the government chose shallow support today and weaker investment for tomorrow. 

That is the fundamental failure of this Budget. 

The headline measure is a £100 cost– of– living payment for around 20 million households, delivered through the council tax system. Any support is welcome. But with energy bills £1000 higher than pre-crisis levels, £100 is unlikely to make a meaningful difference for households already struggling to afford the essentials. 

The government had £2.6 billion available to spend. It could have chosen to provide deeper support to households facing the greatest hardship. Instead, it chose to spread support broadly across a much larger group. 

In the middle of a persistent energy affordability crisis, that was the wrong choice. 

Alongside this headline announcement, there were some positive measures. 

The decision to shift the gas standing charges to the unit rate will help many low-use households. On average, these households are expected to save around £45 a year. For people using prepayment meters, it also addresses a particularly harmful feature of the current system. When a meter runs out of credit, standing charges continue to accumulate as debt. That debt must be paid off before a household can switch the heating or lights back on, creating yet another barrier for people already struggling to afford their energy. 

This change is genuinely important. 

However, standing charges will not disappear. Their costs will instead be recovered through higher unit rates. Higher-use households are expected to pay more as a result, with average increases of around £65 a year. Some vulnerable households with health conditions that require living in a warmer than typical home, will therefore lose out, and there was little detail on how those impacts will be mitigated. 

On balance, this is a sensible reform. But it is not a solution to the affordability crisis facing people this winter. 

The extension of the electricity VAT cut for a further three months is also welcome, although its impact will be relatively modest. 

And after years of campaigning by National Energy Action and many partners, the commitment to introduce an energy debt relief scheme next year is an important step forward. Energy debt has reached record levels, trapping many households in a cycle of arrears and hardship. This debt is concentrated around low-income households who cannot afford their bills, and certainly cannot afford to pay back their debts. A debt relief scheme is badly needed. 

But next year is not this winter. 

The challenge facing households is immediate. The scale of the response simply does not match the scale of the challenge. 

These shortcomings become even harder to justify when viewed alongside the government’s decision to cut funding from the Warm Homes Plan. 

Faced with pressure to find savings, ministers chose to reduce investment in the very programmes designed to help households reduce their energy consumption and lower their bills permanently. 

The Budget includes a £700 million cut to support for heat pumps and a £200 million reduction in grant funding for low-income households from 2028. 

The reduction in heat pump subsidies will not have a direct impact on most fuel poor households. The Boiler Upgrade Scheme is not primarily targeted at them. But these cuts risk slowing market growth, weakening supply chains and making it harder to drive down costs over time. That ultimately makes the wider transition to affordable low-carbon heating more difficult. 

The cuts to support for low-income households are even more concerning. 

Even before this Budget, government plans were insufficient. Around one million low-income households were expected to remain in energy-inefficient homes, despite a statutory ambition to bring that number down to zero. Cutting funding moves us further away from that goal. 

Fewer households will benefit from home upgrades. 

More households will continue to live in cold, damp and unhealthy homes. 

More households will remain exposed when the next energy price shock arrives. 

That is a choice. 

There are suggestions that some existing Warm Homes Plan funding could be brought forward into 2027 and 2028, which may soften some of the impact. But it does not alter the overall picture. 

At the start of this week, plans to tackle fuel poverty through warmer, more energy-efficient homes were already falling short of what was needed. By the end of it, they are weaker still. 

Budgets are about choices. 

This government chose to provide a £100 cost-of-living payment while energy bills remain around 70% higher than before the crisis. At the same time, it chose to scale back investment in one of the most effective long-term solutions to unaffordable energy bills: improving the homes people live in. 

Those choices matter. 

They mean some additional support this winter, but not enough for households facing the sharpest rises in energy costs. They mean less progress towards the warmer, healthier homes that would protect families from future price shocks. And they mean more households left exposed to energy costs that remain dramatically higher than they were just a few years ago. 

In the middle of an energy affordability crisis, these are the wrong choices.