The Chancellor of the Exchequer, Jeremy Hunt, has made it clear that the Government will not continue to subsidize household energy bills indefinitely. He noted in his budget statement on Thursday that the cost of providing such support is equivalent to funding the NHS.
As Putin’s war in Ukraine continues and wholesale energy prices remain sky-high, it’s clear that households could face exorbitant gas and electricity bills for years to come.
So what help is available now, and what financial assistance can households expect in the future? Last week’s budget gave some clear indications of what lies ahead.
Frost blast: The energy support scheme is coming to an end, although households on means-tested benefits will receive an extra £900 payment next year to help deal with the high cost of living.
Energy bills will increase from April, when the support available from the Government will be reduced considerably.
The current energy price cap means households are paying an average of £2,500 a year for gas and electricity. If the cap weren’t in place, we’d be paying close to £1,000 more.
But from April, the cap will increase to £3,000 for the next 12 months. In addition, this year’s energy support scheme, amounting to a £400 payment for each household’s bills, will not be carried over into next year.
Households with means-tested benefits will receive an extra payment of £900 next year to help deal with the high cost of living.
The energy price cap could also be changed again sometime after April so that those who use very large volumes of energy receive more limited subsidies. For example, homes with heated swimming pools may have to pay even more for their energy.
The Government will explore ways to ensure that homes that use a lot of energy for medical reasons are not put at risk.
Households not connected to the gas network will get £200 towards their bills this winter, double the amount previously promised.
Those who heat their homes with diesel, LPG and biomass boilers will receive payment through their electricity provider.
The Government is considering the introduction of social tariffs from April 2024. These are likely to equate to cheaper energy offers for households with the lowest incomes.
The Government has stepped in to help with the rising cost of energy. But Hunt warned that in the long term that is unsustainable. He said: ‘There is only one way to avoid being at the mercy of international gas prices: energy independence combined with energy efficiency.’
Hunt announced an acceleration in the program to switch to renewable energy, including proceeding with the new nuclear power plant at Sizewell C in Suffolk.
It also announced additional funding of £6.6bn from 2025 to 2028 to improve the energy efficiency of homes and other buildings. Hunt said the reduction in demand resulting from increased energy efficiency would cut the equivalent of £450 off the average annual household energy bill.
Details of how households will be able to access the financing have yet to be announced. The newly formed Energy Efficiency Task Force has promised more details. Industry experts hope the funds will be used to extend an existing scheme called the Energy Company Obligation (ECO), which some households can already access for help with energy efficiency measures.
Mike Foster, chief executive of the Energy and Utilities Alliance, says: “The ECO scheme is likely to be extended so that not only those on low incomes and living in the worst insulated houses can benefit.”
He adds that some households may want to delay making energy efficiency upgrades in the hope that they can take advantage of government funding to be announced in the future. “However, those who resist will lose out on the savings they could make on their energy bills in the meantime,” she notes.
You can check your eligibility for existing support with improving your home’s energy efficiency at gov.uk/improve-energy-efficiency.
Industry body Energy UK has welcomed the new funding announcement, but called for it to be made accessible earlier so that households can start benefiting from it now that they are already struggling with extreme bills.
Energy UK policy director Louise Shooter says: “We understand there are restrictions on materials and labour, but we urge the government to bring some of the funding to this parliament.”
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