The October discount on energy bills will be doubled to £400 and the requirement to repay it over five years scrapped, the Chancellor Rishi Sunak has announced.
The government has unveiled a £15 billion support package to help households who are struggling with soaring energy bills, including a £400 non-repayable payment for every household, regardless of their income. The payment will be spread over six months.
The £400 payments replace the government’s earlier plans to provide a £200 rebate for every household in October. These rebates had to be paid back, whereas the £400 payments aren’t repayable.
Four out of five homes in England are also eligible for a £150 discount on their council tax bill. All households in council tax bands A, B, C and D qualify for the rebate, which was supposed to be paid in April, although many households say they are still waiting to receive their payments.
Sarah Coles, senior personal finance analyst at investment platform Hargreaves Lansdown said: “Unfortunately the sheer scale of energy price rises mean that despite the support announced today, a huge number of families will still face enormous challenges in making ends meet.
“Rishi Sunak said that over the year energy bills will rise by an estimated £1,200. Even after they received the £150 council tax rebate and the £400 grant, this still leaves them having to squeeze an extra £650 from their budgets – at a time when the price of everything else is on the march too. What’s more, by waiting until October to provide the energy grant, there’s a real risk that people’s financial resilience will be completely exhausted by then.”
Earlier this week, Ofgem, the energy regulator, said that it expected the energy price cap to increase to an eye-watering £2,800 from October for a typical household, up from £1,971 currently.
The energy price cap limits how much suppliers can charge consumers for their energy usage. The cap is set by Ofgem which reviews and updates it every six months to reflect factors like wholesale energy prices and distribution costs. Ofgem can also alter the price cap depending on market changes.
The cap is designed only to provide an indication of the maximum amount per year the average household using a “typical” amount of energy would pay. If, for example, you live in a large or small property, you may pay much more or less than this. Find out more about how the energy price cap works in our article What is the energy price cap?
Extra help for low income households
More than eight million low-income households on benefits will receive two further payments totalling £650 on top of the £400 payment, the Chancellor confirmed.
The £650 payment will be given to those receiving Universal Credit, pension credit, Tax Credits and legacy benefits, and will be made in two separate tranches starting in the summer. Sarah Pennells, consumer finance expert at Royal London said: “You had to have started your claim for pension credit by 25 May to get the first payment of £325, but the government hasn’t yet announced the cut-off date for the second payment, so you could still qualify if you make your pension credit claim.”
The government will also give a £300 payment to over eight million pensioner households who normally receive the Winter Fuel Allowance, and a further £150 payment to those receiving disability benefits.
The Winter Fuel Allowance usually provides between £100 and £300 to help pay your bills, with the amount depending on how old you are and who else is in your household.
Laura Suter, head of personal finance at AJ Bell, said:“Pensioners have literally been left out in the cold in the current energy crisis until now, with no specific support, despite spending a large proportion of their income on energy bills.
“The additional £300 in Winter Fuel Allowance is a simple way to target support directly at this group – but it’s not without its faults. The Winter Fuel Allowance is far from targeted support, as it’s handed out to every pensioner in the UK, regardless of income level – meaning many households will get the handout even if they don’t need it.
“Those on pension credits will also benefit from the £650 handout to those on benefits, but this blanket one-off increase in the Winter Fuel Allowance is the Government’s way around helping the large number of people who don’t claim pension credit. Surely a longer-term fix for helping the chronic underpayment should be next on the Government’s to-do list.”
Find out more about pension credit and whether you might be eligible to claim it in our guide Pension Credit explained.
If you don’t qualify for additional support with energy bills because you aren’t in receipt of benefits, you may still be entitled to money off your bills under the Warm Home Discount scheme. This is a one-off discount on your electricity bill paid on your behalf to your energy supplier between September and March. Found out more about the different kinds of support available in our article The energy bills crisis: what can you do about soaring costs?
You might also be able to claim help from the Household Support Fund – a further £500m will be allocated to this fund which is administered by councils to help households facing extra hardship.. Learn more about how the fund works in our guide The Household Support Fund explained.
To help cover the cost of the extra support being offered, the Chancellor said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their “extraordinary profits.”
What do you think of the new package of support measures? Do you think Rishi Sunak has done enough, or do you think more help is needed? We’d be interested to hear your views. You can join the conversation on the Rest Less community or leave a comment below.