The decision to limit the ‘energy price guarantee’ scheme to six months will put 11 million UK households into fuel poverty from April unless the government ensures they all receive targeted support, campaigners warn.
New Chancellor Jeremy Hunt announced Monday that the government would waive its commitment made last month to protect households against rising energy bills for two years by capping the average annual bill to £2,500.
As of April, he said the state would only provide more targeted assistance to the most needy households without providing details. He said the Treasury would launch a review to decide how to reshape the scheme, which “would cost taxpayers significantly less”.
The decision to scrap the two-year universal scheme will see average annual energy bills rise to more than £4,300 from April, according to consultancy Cornwall Insight.
That curtailment of the domestic support scheme brings it in line with the separate business package, where companies will receive only six months of universal support before ministers switch to a more targeted program for ‘vulnerable’ industries.
The End Fuel Poverty Coalition estimated that the number of people living in fuel poverty would rise from 7 million to 10.7 million in April without new government support.
“The government may have brought some stability to the markets, but it has come at the cost of massive instability in household finances,” said Simon Francis, coordinator of the End Fuel Poverty Coalition.
“The new Chancellor must work quickly, and with consumer groups and charities, to design a new package of aid and energy market reforms that will help those in fuel poverty now and beyond April.”
Downing Street on Tuesday reiterated Hunt’s assurances that the most vulnerable would continue to receive aid beyond April. “We want to provide certainty to the public about what will happen next,” said a spokesman for Prime Minister Liz Truss.
But the spokesperson said they were unable to provide guidance on how many people would continue to receive aid after April, or what form it would take. “The Treasury is working with Beis [the business department] and others. We are aware that we want to give details where possible.”
Liberal Democrat leader Sir Ed Davey called on the government to keep the energy price guarantee for one year instead of six months. “Millions of struggling families will face skyrocketing utility bills and skyrocketing mortgage rates next year,” he said. “The reality is that a large number of people will urgently need help.”
Tory MPs also worry about many families higher up on the income scale who may not qualify for the new aid, yet struggle with a spike in utility bills at a time when mortgage rates are rising.
Reducing energy support could help keep financial markets stable, but it will make the political situation worse next spring, said a conservative backbencher.
Helena Bennett, head of climate policy at think tank Green Alliance, urged the government to roll out a program to make homes more efficient: “Announcing a nationwide home insulation program quickly would help close the gap in the country’s finances. “
The End Fuel Poverty Coalition said changes also need to be made to the way bills are calculated, including abolishing the so-called standing charge for a connection to the energy grids, whether gas or electricity is used. This is up about 86 percent since the winter of last year, adding about £371 a year to bills.
The standing charge also includes the cost of rescuing customers from suppliers who have collapsed. This adds around £94 a year to bills, but will increase next year once the costs of Bulb, one of the largest failed suppliers, are included.