Government outlines plans to cut energy bills by £50

George Osborne: "We're not pretending that we can freeze the world gas price"

The coalition has outlined its proposals to reduce energy bills by an average of £50 a year in an effort to offset rising costs.

Chancellor George Osborne said the government would pay for some measures currently included in people's bills, and the cost of insulating homes would be spread over a longer period.

This would "help families" and firms would comply with the changes, he said.

Labour said the plans remedied less than half of this year's £120 increase.

Rising energy bills have become a major political issue in recent months, as the main political parties look to offer policies to reduce the squeeze on people's standard of living in the run-up to the next general election.

'Insistent'

Labour says it will freeze gas and electricity bills for 20 months if it wins the next election, but the Conservatives and Liberal Democrats argue this is unrealistic because of the varying and unpredictable international costs of gas and other fuels.

Speaking on BBC One's Andrew Marr Show, Mr Osborne said of his own proposal, to be set out in detail in Thursday's Autumn Statement: "This will help families... We've been in discussions with the energy companies."

Analysis

The news from the prime minister that the government's energy efficiency programme will now concentrate on schemes that offer best value for money will be broadly welcomed.

But there is anger among green groups that the overall budget for saving energy and bills is being cut, whilst other capital schemes which increase CO2 emissions - like new roads - will still go ahead.

Energy experts have been aghast at the recent turmoil over policy.

A government green business adviser, Peter Young from the Aldersgate Group, has written to the PM warning that in their attempt to drive bills down, politicians may be forcing bills up.

This is because volatile policy may drive up interest rates for firms needing to spend £100bn to renew the UK's power system.

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He added: "There's going to be an average of £50 off people's bills... We are absolutely insistent that this is going to be brought in."

Mr Osborne said the change would be part-funded by extra tax money from cracking down on tax avoidance. That would reduce annual bills by approximately £12, the BBC understands.

Asked whether the energy firms would pass cost savings on to customers, Mr Osborne said: "I don't want to pre-empt what they are going to say in the next few days, but I'm clear that it's going to happen."

He attacked Labour leader Ed Miliband's promise of a price freeze as a "con", adding that the coalition had the "right approach" to cutting bills

Writing in the Sun on Sunday, Prime Minister David Cameron and his deputy Nick Clegg also confirmed that the cost to energy firms of insulating homes, "apart from in the worst-off homes," would be spread over four years instead of two.

They said these proposed changes to the "energy company obligation", reported by the BBC earlier this week, would reduce bills, but did not specify by how much.

Mr Cameron and Mr Clegg also said the government would pay for new incentives for people to insulate their homes.

In addition, landlords would be offered cash incentives to insulate their least energy-efficient properties between old tenants leaving and new ones moving in.

But, for Labour, shadow chancellor Ed Balls, also appearing on the Andrew Marr Show, said the government was simply "shifting" costs "from energy bills to the taxpayer".

"That's not a help. It's just a shifting of the burden," he said.

"They are the government. They need to get a grip. Why are David Cameron and George Osborne running scared?"

Ed Balls: "A £50 cut will still mean people are paying bigger energy bills this winter"

He added: "Anything they do is better than nothing. Shifting, though, from bills to taxes is giving with one hand and taking with the other."

The Association for Conservation of Energy (ACE), which represents the insulation industry, said the government's scheme amounted to halving large parts of the budget for insulation, previously projected by government to run at £1.3bn a year to 2022.

The main casualty would be the expensive help for insulating solid-walled homes that is currently offered to householders to save on their bills and cut carbon emissions. The primary focus will now be on the cheapest measures to achieve energy efficiency, such as roof and cavity wall insulation, ACE added.

The organisation estimates that the changes will cost 10,000 jobs in the insulation industry, mostly in small firms, although its numbers are uncertain until full details of the policy become clear.

Spokesman Andrew Warren said: "It beggars belief that the government is trying to cut energy bills by delaying a scheme that itself cuts energy bills.

"The government has been hoodwinked by the big six energy firms, who don't want to insulate people's homes because it means less profits for them."

E.On - the only one of the big six energy companies in the UK that has not yet announced an increase in its tariffs this autumn - said it would wait for a formal statement from the government before commenting, "but we are pleased that steps seem to be being taken that will ultimately benefit our customers".

EDF welcomed the plans and indicated it was not now likely to hike prices again before 2015.

It said its "decision to hold back the full impact of rising costs" earlier this month by implementing a lower rise than competitors had been "validated by the confirmation that the government will take action on energy charges".

"Customers should expect other energy suppliers to follow EDF Energy's lead by significantly lowering their prices," a spokesman said.

And Scottish Power issued a statement saying: "We are pleased the government has recognised the impact of levies and we have worked collaboratively with them to identify a number of new individual savings.

"Once implemented, these will lead to real savings in 2014."

Energy price rise chart

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