By Sophie Lindqvist

Chancellor John Healey has declared cheaper energy the government's "first and foremost" priority, a formulation that quietly demotes Labour's net zero commitments and sets up a week of uncomfortable choices for Prime Minister Andy Burnham. On Thursday Burnham travels to the COP 31 climate summit in Turkey, then on to Dublin to pursue an energy market deal with European leaders. Both stops will test whether the new positioning survives contact with diplomacy.

"Today I'm setting a new course on energy: to get UK energy costs down in line with Europe," Healey said in his Budget speech. "From this point, our government priority is first and foremost cheaper energy, with clean power key to achieving this."

The lines raised eyebrows in Westminster. The first test came when energy secretary Miatta Fahnbulleh approved the Jackdaw gas field — apparently against her own instincts. The second arrives this week.

What does this change for manufacturers?

British firms pay roughly four times as much for electricity as American companies and about twice as much as their European counterparts, according to government analysis and international agency data. The gap persists even for manufacturers running on greener power. That cost wedge, not rhetoric, is what Burnham carries into Dublin.

Higher international energy prices driven by the Iran war have raised the diplomatic stakes across government. Policy researchers working under the new Prime Minister must now find ways to ease costs for households and businesses simultaneously — a brief with no obvious cheap answers.

The decisions ministers are dodging

Three flashpoints define the trade-off:

• Rosebank. Equinor awaits a decision on opening the oil field. Fahnbulleh and Healey have reportedly sparred over how new drilling squares with the manifesto promise of no new oil and gas licences. Labour backbenchers are queueing up to condemn approval publicly.
• Electric vehicles. Louise Haigh, who enforces Burnham's agenda in government, is expected to water down EV sales targets to help carmakers — at the risk of derailing decarbonisation.
• The 2030 target. Fahnbulleh has suggested the ambition to eliminate almost all fossil fuels from power supply by 2030 could be dropped if the UK's "affordability challenge" is not solved first.

Each retreat is framed as temporary. None comes with a date for reversal. Healey and Fahnbulleh must reconcile manifesto commitments with the cost agenda, a tension that could split the party between environmental absolutists and centrists weighing economic trade-offs.

The subsidy on the table

The government has promised about 10,000 energy-intensive businesses a discount of up to 25 per cent on electricity bills from April, at a cost to taxpayers of billions by 2030. Additional funding would come from aligning UK and EU carbon markets and exempting businesses from existing levies (mandatory charges added to bills to fund policy programmes).

The caveat: Britain still falls short, on some metrics, of the infrastructure needed to fully electrify industry, which remains heavily reliant on fossil fuels. A bill discount does not fix that.

Strip the levies, or spread the cost?

The emerging consensus among energy market observers is to remove levies from bills and fund subsidies through general taxation. The cross-party Energy Security and Net Zero Committee, led by Labour's Bill Esterson, called removing all net zero costs from electricity prices a "critical means for substantially bringing down bills".

Research from the Institute for Fiscal Policy (a fiscal think tank) found taxes and policy costs, including the climate change levy, made up over a third of industrial electricity costs for businesses that are not energy-intensive. It suggested spreading decarbonisation costs across the whole economy, or stripping all fixed costs from the unit price.

What the cheap-energy case leaves out

Conservatives and Reform UK have pledged to scrap net zero legislation and remove levies. Research by Transira Energy and Onward, backed by the Tories, claimed abandoning net zero regulations and taxes could save households up to £540 a year between 2030 and 2050. The same report concedes the UK economy would be more exposed to international gas price shocks as electrification slows — a caveat worth weighing against the headline number.

The Office for Budget Responsibility, in its 2025 fiscal risks report, modelled a scenario of three degrees Celsius of global warming in which climate change damage contributes roughly three-fifths of the addition to public sector debt by 2074. Levies are visible on this month's bill; that liability is not.

The Dublin test

What does this change for Burnham's "re-industrialisation" pitch? In negotiations with EU chiefs and international representatives this week, he must advocate long-term net zero policy while conceding that Britain currently looks unattractive to manufacturers. The two messages sit uneasily in the same room. How he sequences them in Dublin will signal which commitment — cheaper energy or clean power — actually holds the higher rank.