Chancellor Rachel Reeves is reportedly contemplating a significant fiscal shift that would benefit energy corporations while reducing household efficiency support.
Treasury officials are examining proposals to grant the oil and gas sector tax relief worth £6billion through the removal of the Energy Profits Levy.
This potential concession to the energy industry comes as the Government simultaneously considers slashing the Warm Homes Plan budget by £6.4billion, which would be a move that breaks Labour’s manifesto pledges.
The programme, designed to upgrade Britain’s housing stock and reduce domestic energy costs, faces a potential 40 per cent reduction.
Such a dual approach would see profitable energy firms receive substantial tax benefits while millions of households continue grappling with heating costs.
The proposals emerge ahead of this month’s Budget amid intense lobbying from the offshore energy sector.
Ministers are exploring plans to redirect £6.4billion from the £13.2billion allocated for home improvements.
The funds would instead support immediate energy bill relief measures, according to Treasury briefings reported in The Guardian.
Rachel Reeves may cut insulation funding and green levies to ease bills in a move favouring energy firms
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This reallocation would effectively slash Britain’s energy efficiency investment by two-fifths across the next half-decade.
The proposed changes would see existing programmes substituted for elements of the Warm Homes Plan.
The original scheme promised comprehensive support for property upgrades, including insulation installations, heat pump systems, energy guidance services and locally managed retrofitting projects.
It formed a central pillar of Britain’s strategy to reduce energy consumption, assist vulnerable families and meet carbon reduction commitments.
Yet the potential diversion of resources threatens to severely curtail these ambitions, particularly for residents enduring the poorest housing conditions.
The plan would hand major tax breaks to energy firms while leaving households struggling with high heating bills
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The industry body Offshore Energies UK has drafted recommendations that would see the windfall levy terminated by year’s end.
Treasury analysis indicates this would deprive public coffers of £6billion across the coming decade.
Energy corporations have mounted an extensive campaign over recent months, pressing ministers to abolish the levy despite recording substantial profits.
Shell notably declared negative UK taxation last year while the sector accumulated billions in earnings.
Robert Palmer, deputy director of Uplift, said: “Oil and gas companies have made billions in recent years while millions of people in the UK have struggled with unaffordable energy bills.
“Worse, firms have chosen to hand these windfalls to overseas shareholders rather than reinvesting them to support UK jobs.”
Advocacy organisations have denounced the proposals as fundamentally unjust, highlighting that approximately 12.1 million British households currently struggle with excessive energy expenses.
Among these, 5 million experience severe fuel poverty, dedicating over a fifth of their earnings to heating and power.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Giving tax breaks to fossil fuel giants and failing to collect tax from large corporations while cutting support for those in fuel poverty are short-term acts of weakness by the Chancellor.”
Mr Palmer further cautioned against supporting a declining industry, noting the North Sea’s diminishing reserves and escalating extraction costs.
He said continued drilling remains economically viable solely through substantial Treasury subsidies, effectively diverting resources from essential public services.
The planned cuts risk breaching legal targets to end fuel poverty by 2030
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Environmental campaigners argue the Chancellor risks repeating previous policy failures while abandoning crucial manifesto pledges.
The proposed budget cuts would undermine statutory obligations to eliminate fuel poverty by 2030.
Annabel Rice, senior political adviser at Green Alliance, said: “If the Government is serious about lowering people’s bills for good, they must invest in insulating our homes, not raid schemes that have helped families lower their energy costs to make their sums add up in the Budget.”
Jonathan Bean of Fuel Poverty Action said: “The Government should be focused on getting homes fixed and replacing the failed Eco4 scheme with a well-funded home upgrade programme that delivers high-quality work and guaranteed bill savings.”