Martin Lewis sounds alarm over Rachel Reeves’s £150 energy bill cut – and warns of ‘unthinkable’ outcome

Following Rachel Reeves’ confirmation of a £150 reduction to household energy costs from April 2026, Mr Lewis issued guidance on how the policy should be passed on to customers.

He said suppliers must not pick and choose who receives the saving and stressed that the discount should apply across all tariff types, including fixed-rate contracts, calling it “unthinkable” for companies not to honour the full reduction.

Mr Lewis emphasised that the government has “clear expectations” for suppliers to transfer the complete saving to consumers and warned that failing to do so would undermine competitive market principles.

To reinforce his point, he highlighted the Energy Price Guarantee as a precedent in which suppliers were required to pass on government-mandated support to customers regardless of their contract type.

The reduction will take effect through the April 1 price cap and is expected to cut electricity unit rates by around 3.3 pence per kWh and gas rates by around 0.3 pence before VAT.

Mr Lewis explained that these figures reflect typical usage conditions and that households will see different levels of savings depending on consumption.

In a post on X following the budget’s announcements, he said: “Everything else being equal, it will be equivalent to a rough 3.3p reduction in the electricity unit rate and 0.3p reduction in the gas (pre VAT). For someone on typical bills, this will equate to roughly £150/yr reduction (clearly use more it’s bigger, use less it’s smaller)”.

| ITV/GETTY

A typical household is forecast to save around £150 a year from the reduction, with higher-usage homes seeing larger cuts and lower-usage households saving slightly less.

Announcing the measure, Ms Reeves said the change will deliver an average £150 saving for families across the UK, stating: “Money off bills, and in the pockets of working people. That is my choice. Not to neglect Britain’s energy security, like the Tories did.”

Mr Lewis said he had shared these calculations after discussions with senior government officials to clarify how the Chancellor’s announcement will translate into real-world bill cuts when introduced in 2026.

The Chancellor plans to eliminate the Energy Company Obligation scheme, which currently adds £1.7billion annually to household bills across Britain.

Ms Reeves stated that the initiative has “failed” in its objectives, noting that “for 97 per cent of families in fuel poverty, the scheme has cost them more than it has saved.”

LATEST DEVELOPMENTS:

| PA

The government will achieve the £150 reduction by transferring three-quarters of energy levy expenses away from consumer bills into general taxation. Mr Lewis highlighted this approach aligns with his longstanding advocacy for a more progressive funding model.

Resources previously allocated to the ECO programme will be redirected towards the Warm Home scheme, though specific details about this transition remain forthcoming.

The restructuring represents a fundamental shift in how Britain funds energy efficiency initiatives whilst aiming to provide immediate relief to households.

Mr Lewis revealed he had “pushed hard” during government discussions to ensure fixed-rate customers would receive the discount, receiving assurances that “the government has clear expectations this cut will be passed on in full by suppliers.”

The financial expert noted that although the exact rules for how the discount will be applied have not been set out yet, the Energy Price Guarantee showed that suppliers are able to pass reductions to every customer, no matter what tariff they are on.

He also said he remains hopeful that standing charges could be addressed in future reforms, but admitted this has not happened in the current plans.

His comments underline continuing worries about fairness in the energy market and the need to make sure every household benefits from government bill-cutting measures, regardless of which tariff they are signed up to.