TUC calls for emergency social tariff to shield households from “punishing costs” of Trump’s illegal war
Ahead of new energy price cap, TUC calls for emergency social tariff to cut up to £559 off bills each year
Scheme would see most households’ bills cut – and almost all of the rest would continue to have their bills held down by the Price Cap
Union body says households must not bear the brunt of the costs of Trump’s illegal war
A social tariff would likely reduce CPI inflation by between around 0.3 and 0.4 percentage points
TUC says scheme should be paid for by an increase in the windfall tax on banks
The TUC is today (Thursday) calling for an emergency energy social tariff to shield households from spiralling energy bills as a result of Trump’s illegal war.
Bills are set to rise for households up and down the country after June when the current price cap expires.
The TUC says the government should step in to deliver a permanent social tariff to provide a percentage reduction to energy bills to all those on low and middle incomes. The scheme design should include a built-in trigger for additional temporary support to rise during acute energy cost crises.
The TUC says low-income families need the greatest protection, but support for middle income families is also necessary. This will protect living standards and our economy from a sustained shock by keeping prices down and helping inflation remain stable.
Emergency model
Adjusted for household size (based on equivalised household incomes, an affordability measure used across government), the emergency model would see:
Lowest income households save up to £559 per year: An immediate 30% reduction to total household bills to the 17% of households whose combined annual income (adjusted for household size and composition) falls below the relative poverty line.
Households below the median save up to £373 a year: A 20% reduction would be made for a further 33% of households whose combined annual income falls between the relative poverty line and median household income.
Middle and some higher income households save up to £186 a year: A 10% reduction would be given to an additional 15% of households whose combined annual income falls between the median and mean of household income, bringing the total beneficiaries to 65% of households.
This approach would protect two-thirds of households from punishing rises, with the vast majority of remaining households still benefiting from the price cap, except extremely large country estates which can afford to pay more with this income then used to help support lower income households.
The TUC says if put into place now, the scheme would cost £3.4-5.9bn per annum, depending on variations in the wholesale cost of energy and how long the current energy crisis lasts.
The union body says that in large part this should be paid for by increasing the bank surcharge tax, which could raise as much as £50bn over the next four years.
TUC polling shows increasing the windfall tax on banks is incredibly popular with voters across the political spectrum.
TUC polling shows increasing the windfall tax on banks is incredibly popular with voters across the political spectrum.
Permanent standard social tariff
The TUC is also calling for a long-term permanent social tariff to protect households from the rollercoaster of energy prices a result of global fluctuations.
Under the TUC's proposed standard social tariff, based on current prices and adjusted for household income:
Lowest income households would save £466 a year: a 25% reduction to their energy bills.
Below median households would save up to £279 a year: a 15% reduction to their bills.
The TUC says this approach should be paired with long-term changes. This includes the government going further to permanently de-link UK energy prices from international wholesale gas prices to stop paying gas prices for renewable energy and to better regulate the profits of fossil fuel generators.
The UK should move from being a price-taker to a price-maker to shield households and firms from global price shocks.
The current trajectory for decoupling electricity prices and gas prices through ramping up renewables looks set to reduce bills over the long term but more action is also needed.
Impact on inflation
A social tariff would reduce inflation. TUC analysis, drawing on Bank of England judgements about the impact of the government’s recent energy bill package estimates that the standard social tariff could reduce CPI inflation by around 0.3 percentage points and the emergency tariff by around 0.4 percentage points.
TUC General Secretary Paul Nowak said:
“Working people must not bear the brunt of Trump’s illegal war.
“The government has rightly stepped up support for energy intensive industries – it's now time to act on household bills too.
“The price cap has kept down bills for now, but the changing price cap means that from the summer, households will start to feel the pain of rising bills.
“That’s why we are calling for an emergency social tariff which will cut bills for two thirds of households – those that need it most – and retain the price cap for everyone else except the extremely wealthy minority on huge estates.
“This common-sense approach would stop punishing price rises for households and bring down inflation. It should be paid for by an increase in the windfall tax on banks, who have made eyewatering profits.
“Beyond times of crisis, we need to protect households from the rollercoaster of energy prices in a volatile global market by introducing a permanent social tariff which cuts bills for those low-income households – as well as wider moves to delink British energy prices from international wholesale gas prices.”
TUC report on social tariff: https://www.tuc.org.uk/sites/default/files/2026-05/Domestic_energy_support_policy_proposal.pdf
Model
The model bases eligibility for reductions on ‘equivalised household income’ (before housing costs), which is not the income of an individual nor a simple addition of all incomes in a household, but a true measure of affordability. This is already a measure used extensively (by government and others) to assess household purchasing power and affordability, and one which is appropriate here for four main reasons:
Energy bills are (appropriately) charged at a household level. This requires any direct intervention which is aimed at meaningfully addressing the cost of living to also be made at that level
Energy usage is highly contingent on the composition of a household, with the number of people and their age profiles (which are taken account of in the government’s method of calculating ‘equivalised household income’) being primary factors in understanding the energy demand of a household
Additional circumstances, like disabilities which require a household to use additional energy, are already accommodated for by existing government policies
Using blunt proxies, such as Universal Credit qualification or actual total income, will certainly lead to people falling through the gaps, while a fully universalised provision is both wastefully expensive for the public purse and deeply inappropriate when there are many households with ample capacity to accommodate higher bills
Real world data on equivalised household income is not currently held by energy retailers which bill energy customers. So, to put this policy in place, it will be necessary for the government to swiftly and accurately identify the household-level income of all energy consumers. This will allow their household income to be equivalised and the appropriate support to be made available on bills.
Inflation impact
The TUC estimates that the standard social tariff could reduce CPI inflation by around 0.3 percentage points and the emergency tariff by around 0.4 percentage points. These impacts use recent Bank of England judgements on the government’s energy bill package as a ready reckoner for calculating impacts that our social tariff package could have.
The ONS advise: "The treatment of rebates is made on a case-by-case basis, with reference to historical precedents and available statistical guidelines".
Link to report
- About the TUC: The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together the 5.3 million working people who make up our 47 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.
Contacts:
TUC press office
media@tuc.org.uk
020 7467 1248
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