£9bn bank tax plan could cut energy bills for two-thirds of homes, TUC says

The TUC has told Prime Minister Andy Burnham to bring in a "social tariff" on household energy bills. It wants to pay for it by putting the bank surcharge back up, which it estimates would raise £9bn over four years. A social tariff is a discount on bills based on household income, and the TUC believes two-thirds of households could benefit, the BBC reports.

TUC general secretary Paul Nowak made the call in a BBC interview ahead of the union body's annual congress in Brighton next week. He said next month's Budget needed to show "the government is back in the service of the British people". He said more help with energy bills was at the top of his list of requests to the prime minister and the new Chancellor, John Healey.

Nowak warned that "millions of families up and down the country are worried about turning on their heating this winter" and said energy bills were "fuelling inflation". The banks' trade body has already pushed back against higher taxes on lenders. The BBC report does not include any government response to the plan.

How a higher bank tax would pay for cheaper bills

The bank surcharge was cut from 8% to 3% in 2023 by the then Conservative government, and the TUC wants that cut reversed. Nowak told the BBC: "I think it will appeal to the prime minister. These are policies that make a difference in the real world and people can see a value in them." He also said the idea would be popular with Labour MPs, while the BBC notes the Liberal Democrats and the Greens in England and Wales have also called for a windfall tax on banks.

The money figures have not been consistent. In an earlier report, published ahead of the summer price cap rise, the Daily Mirror said the TUC accepted its emergency social tariff could cost from £3.4billion to £5.9billion a year. The Mirror said the TUC claimed a higher bank surcharge could raise as much as £50billion over the next four years. That is far above the £9bn over four years in the BBC report, and neither outlet sets out the TUC's full workings.

UK Finance, which represents well-known banks and lenders, has suggested heavier levies would undermine the government's ambition to deliver "growth in every postcode" and would damage international competitiveness. It argues UK banks already face a heavier tax burden than those in the US, for example. Nowak was not convinced: "I can't believe banks would leave the UK just because we are restoring the surcharge to where it was in 2023. Bank share prices have risen faster here than in New York."

Which households would get money off their bills

The Mirror reported that the TUC's plan splits households into three bands by income. Homes with the lowest incomes, below the relative poverty line, would get an immediate 30% discount worth up to £559 a year. Households between the relative poverty line and average household income would get a 20% reduction, worth £373 a year.

Middle and some higher income households would save up to £186 a year from a 10% reduction. According to the Mirror, Nowak said the price cap would stay for everyone else "except the extremely wealthy minority on huge estates". The TUC says the three bands together would cover two-thirds of households.

Neither report says which exact income levels would mark the edge of each band, or how a household would prove its income to claim. The TUC wants the tariff to be permanent for low and middle earners rather than a one-off crisis measure. It also wants wider moves to delink British energy prices from international wholesale gas prices.

Key numbers

• £9bn: what the TUC estimates restoring the bank surcharge would raise over four years, according to the BBC.
• 8%: the bank surcharge rate before the then Conservative government cut it to 3% in 2023.
• £559: the most a year the lowest-income households could save under the TUC's 30% discount, as reported by the Mirror.
• £373: the yearly saving for households between the relative poverty line and average income, from a 20% cut.
• £186: the most middle and some higher income households could save each year from a 10% reduction.
• £221: how much the summer price cap rise added to a typical annual gas and electricity bill, according to the Mirror.

What happens next with the social tariff plan

For now this is only a union proposal, not government policy, so nothing changes on your bill because of it. TUC delegates meet in Brighton next week, and Nowak has made next month's Budget the test of whether ministers act. No decision on a social tariff or the bank surcharge has been announced.

One change is already happening. Burnham has temporarily scrapped VAT on electricity bills, which he calls "breathing space". Citizens Advice says no VAT will be charged on household electricity bills from 1 October 2026 to 31 March 2027, with standard 5% VAT returning from 1 April 2027.

What you can do now

You do not have to apply for the VAT cut on electricity, because Citizens Advice says it is applied automatically if you pay your electricity bills. While the social tariff remains only an idea, check whether you can already get help through the Citizens Advice guide to grants and benefits to help you pay your energy bills. It covers the Warm Home Discount, Winter Fuel Payment and Cold Weather Payment, and explains that what you get depends on how you pay, the type of energy you use and whether you claim benefits.

Ofgem's guide to your energy supply and the price cap explains unit rates, standing charges and how your bill is calculated. It also shows how to join your supplier's Priority Services Register, get help with a prepayment meter and complain if something goes wrong. Check your next bill against the guide so you can see whether the VAT cut has been applied.

Your questions answered

Would a social tariff replace the energy price cap

Not under the TUC's plan as reported by the Mirror. Nowak said the social tariff would cut bills for two-thirds of households and keep the price cap for everyone else except "the extremely wealthy minority on huge estates".

Do I need to do anything to get the VAT cut on electricity

No. Citizens Advice says you will automatically get the VAT cut if you pay your electricity bills, and it runs from 1 October 2026 to 31 March 2027.

Why are the banks against the idea

UK Finance says heavier levies would undermine the government's growth ambitions and damage international competitiveness, and that UK banks already pay more tax than those in the US. The TUC disputes this and points out that bank share prices have risen faster in the UK than in New York.