Cold comfort on energy bills for years – but there is help for some: the budget gave some clear indications of what lies ahead
Chancellor of the Exchequer Jeremy Hunt has made it clear that the government will not continue to subsidize household energy bills indefinitely. He stressed in his budget statement on Thursday that the cost of providing such support equals that of funding the NHS.
As Putin’s war in Ukraine rages on and wholesale energy prices remain sky-high, it’s clear that households could be facing sky-high gas and electricity bills for years to come.
So what support is available today and what financial support can households expect in the future? Last week’s budget gave some clear indications of what lies ahead.
Icy blast: The energy support scheme is due to end, although households on means-tested benefits will receive an extra £900 payment next year to help with the high cost of living
Energy bills are expected to rise from April when available government support is significantly reduced.
The current energy price cap means that households pay an average of £2,500 a year for gas and electricity. If the cap wasn’t in place, we’d be paying nearly £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 – equivalent to a payment of £400 towards each household’s bills – will not be extended into next year.
Households on means-tested benefits will receive an additional payment of £900 next year to help with the high cost of living.
Those who use more could pay more
The energy price cap could also be changed again after April so that those who use very large volumes of energy receive more limited subsidies. For example, households 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.
Help for off-grid households
Households not connected to town gas will receive £200 on their bills this winter, double the amount previously promised.
Those who heat their homes with oil, LPG and biomass boilers will receive payment through their electricity supplier.
The government is considering the introduction of social tariffs from April 2024. These would probably amount to cheaper energy offers for the lowest income households.
Support to reduce energy bills
The government stepped in to deal with soaring energy prices. But Hunt warned that in the long term this is not sustainable. He said: “There is only one way to stop being at the mercy of international gas prices – energy independence combined with energy efficiency.”
Hunt announced an acceleration of the switchover program to renewables – including the continuation of the new Sizewell C nuclear power station in Suffolk.
He also announced £6.6 billion in additional funding from 2025-2028 to improve the energy efficiency of homes and other buildings. Hunt said the reduction in demand resulting from greater energy efficiency would reduce the equivalent of £450 from the average annual household energy bill.
Details on how households will be able to access the financing have yet to be announced. Further details have been promised by the new energy efficiency task force. Industry insiders expect the funding will be used to expand an existing program 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, said: “The ECO program is likely to be expanded so that it’s not just people on low incomes and living in the most poorly insulated homes who will be able to benefit.”
He adds that some households may want to delay improving their energy efficiency in hopes of qualifying for government funding that may be announced in the future. “However, those who stick it out will miss out on the savings they could make on their energy bills in the meantime,” he points out.
You can check your eligibility for existing support to improve your home’s energy efficiency at gov.uk/improve-energy-efficiency.
Industry body Energy UK welcomed the new funding announcement, but called for it to be made available sooner so households can start benefiting now, as they are already struggling with extreme bills.
Louise Shooter, Policy Officer for Energy UK, said: ‘We understand that there are material and labor constraints, but we urge the government to provide some funding for this parliament.