By Ian Allan, Head of Market Strategy at Switch2 Energy

With the cost-of-living crisis continuing to squeeze households, it’s understandable that the government is exploring ways in the upcoming budget to reduce energy bills quickly. Any support for residents struggling with high costs is welcome, and proposals to lower bills quickly will naturally attract attention.

But it’s important to look at how those savings are achieved. Recent reports have suggested that the chancellor is considering cuts to the Energy Company Obligation (ECO) to help reduce household bills. The ECO is a long-standing obligation on energy suppliers to fund insulation, heating upgrades and other efficiency measures for low-income households – making it one of the UK’s most important tools for permanently lowering energy demand, and ultimately the long-term costs of heating our homes.

This is why Switch2 Energy joined more than 60 organisations in signing a joint letter to the chancellor calling for a rethink. While immediate bill reductions offer short-term relief, cutting investment in home upgrades would be a serious misstep, and part of a wider pattern of short-termism that continues to hold back the UK’s energy transition.

The cost of short-term thinking

In the joint letter, the UK’s major energy companies, along with charities and climate change organisations, warned that reducing energy efficiency funding risks abandoning £6bn of investment by 2030, leading to the loss of hundreds of thousands of cost-effective home upgrades – and plenty of jobs that come with it.

Short-term fixes have a habit of turning into long-term costs.

Our nation’s energy system requires urgent investment, and delaying essential home upgrades doesn’t address the underlying problem, it only pushes it into the future, when it will be even more expensive and even more urgent.

Homes that rely on outdated heating systems, or that sit at EPC D or below, already cost more to heat. Meanwhile, more than 36% of households spend over 10% of their post-housing income on energy, and the figures for fuel poverty are stark.

The escalation in unrecoverable gas and electricity debt tells the same story: energy is simply becoming unaffordable for too many households. Recent studies show that one in four households will be unable to pay their energy bills by 2026, and national energy arrears are projected to reach £6 billion – costs that ultimately feed back into higher energy prices for everyone else.

In short: we know that fuel poverty is worsening, not improving. Cutting the funding that helps address it would push many households further into hardship.

We’ve been here before. Previous cuts to energy-efficiency programmes in the mid-2010s were intended to lower bills. The opposite happened.

Analysis from Carbon Brief shows that those decisions left UK households £22bn worse off collectively over the subsequent years.

From a sector-wide perspective, reducing investment in energy-efficiency schemes sends a problematic signal to an already fragile supply chain.

The UK’s insulation and energy-efficiency industry is worth around £20bn and supports over 100,000 jobs. Billions in private investment – including capacity for heat networks, manufacturing, low-carbon technology installation and finance – is currently on hold as organisations wait for clarity on the Warm Homes Plan.

Sudden cuts now risk destabilising the workforce and supply chain at precisely the time the sector needs stability, scale and skill-building.

For housing providers that have long-term net zero and asset management strategies, a weakened supply chain means higher costs, longer wait times and slower progress on decarbonisation.

Long-term solutions that cut bills for good

Housing providers play a unique role in the UK’s energy transition.

The sector manages five million homes, houses the lowest-income households, and faces some of the toughest regulatory and reputational pressures around energy performance.

That puts the sector at the forefront of the challenge – and the opportunity.

Permanent solutions such as insulation, heat networks and smart metering technology do more than just cut emissions.

Investment in these measures ultimately reduces energy demand, stabilises costs and creates long-term savings for residents – while allowing landlords to invest in other areas.

The data is clear – residents in the least energy-efficient homes can pay £570 more per year on bills than those in better-insulated properties.

And these technologies can directly influence how residents use energy. Households with smart heat and energy meters can cut their energy consumption by up to 50% through clearer information and more controls over their usage.

The government may be looking for fast ways to reduce bills – but the cheapest energy bill will always be the one that households never have to pay because their homes are warm, efficient and well-managed.

At Switch2, we see every day how targeted investment in energy efficiency and smart heat management helps residents reduce consumption and cut bills sustainably. Direct bill support has a place, but it cannot substitute for the long-term economic, social and environmental benefits of upgrading the fabric of homes and modernising the systems behind them.

Whatever the outcome of the budget, the housing sector must keep energy efficiency and carbon reduction high on their agendas. We can lead where others won’t.

The sector cannot afford to take its foot off the pedal – not when so many households depend on long-term solutions, not stop-gap measures.