Andy Burnham is understood to be planning major policy changes to tackle the cost of living crisis and bring energy bills down for millions.
The Number 10 Downing Street hopeful is looking to win over the voting public by tackling soaring costs following Ofgem’s recent hike to energy price cap.
It is understood that one proposal, known as an “affordable energy guarantee,” would deliver approximately £225 in annual savings for middle-income families by providing discounted rates for basic electricity and gas consumption.
Those in favour of the policy change cite that similar pricing structures already operate in Japan and India.
Last week, Mr Burnham acknowledged that families were “paying too much for the basics,” stating: “We do need to be serious about putting more money back into people’s pockets.”
Under the scheme being developed by Miatta Fahnbulleh, a former energy minister now advising Mr Burnham, households would receive cheaper rates for what is deemed essential energy consumption.
The thresholds determining this essential usage would vary according to household size, with additional assistance directed towards those on lower incomes.
The Joseph Rowntree Foundation, which devised the £7billion plan, calculates that the poorest families would see their bills reduced by £270 annually.
Even the wealthiest households would benefit, gaining an average discount of £179 on their energy costs through the universal block tariff structure.
Questions remain over how Mr Burnham would finance such an ambitious programme. The Joseph Rowntree Foundation, the think tank behind the proposal, has suggested raising revenue through increased taxation on entrepreneurs and property landlords.
Despite the ambitious proposal to tackle the cost of living crisis, the plan has already attracted criticism from within Labour Government’s own ranks.
Some party figures have voiced reservations about certain aspects of the scheme, while allies of James Purnell, Mr Burnham’s chief of staff, have branded elements of a wider cost of living package presented by Ms Fahnbulleh as “naive” and unworkable.
Others have raised concerns that implementing the policy would necessitate substantial tax increases.
Industry sources have cast doubt on whether the proposals would genuinely reduce energy costs, suggesting the measures would simply shift expenses between consumers rather than lowering them overall.
Ofgem, the energy regulator, has separately been reviewing comparable approaches aimed at addressing rising standing charges.
The Joseph Rowntree Foundation has argued its plan could trim half a percentage point from headline inflation, which it believes would prompt the Bank of England to reduce interest rates.
