Support for Households
Boris Johnson’s Government had already taken steps to help the lowest-income households with the cost of living before the April price cap rise, by: reducing the Universal Credit taper rate; increasing the National Living Wage; freezing fuel duty for the twelfth consecutive year; and launching a £500 million Household Support Fund.
Following Ofgem raising the price cap in April, the Government put forward a three-part support package to help both lower- and middle-income earners with the immediate adjustment. This includes:
- Energy Bill Discount: £400 off energy bills for households in Great Britain from this October. This automatic, non-repayable discount will be applied in six instalments between October 2022 and March 2023
- Cost of Living Payment: A payment of £650 this year for households on means tested benefits, including Universal Credit, Pension Credit and Tax Credit. This will be made automatically in two instalments, one in summer and another in the autumn.
- Disability Cost of Living Payment: A one-off £150 payment in September to help with extra costs for individuals on disability benefits. This is in addition to the £650 Cost of Living Payment for disabled people who also receive means tested benefits.
- Pensioner Cost of Living Payment: An extra one-off £300 payment for pensions which will be paid as an automatic top-up to the Winter Fuel Payment.
Previously, the Government had provided a non-repayable £150 cash rebate for homes in Council Tax bands A-D (equivalent to 80 per cent of all households) and £144 million of discretionary funding for local authorities to support those not eligible for the council tax rebate. Accordingly, all households would receive £550, with lower-income families receiving even more help.
Government action to support households, announced by former Prime Minister Liz Truss on 8 September, replaced the price cap with a new Energy Price Guarantee, which was initially set in place for the next two years to ensure that a typical household would not pay more than £2,500. The new Chancellor, Jeremy Hunt, announced reforms to the Energy Price Guarantee on 17 September 2022 in a statement to the House of Commons.
- The Energy Price Guarantee will ensure that a typical household in Great Britain pays the equivalent of £2,500 per year on their energy bill through to April 2023
- An additional discretionary fund will be available for those households who are outside of the schemes. For example, households not on standard gas/electricity contracts.
- From April 2023, the price cap will rise so that a typical household will pay £3,000. The Energy Price Guarantee will then end in April 2024. It comes in addition to the £400 Energy Bill Support Scheme and will support millions of people through a difficult winter and meaning they will not have to face bills of £6,000 this winter.
The Energy Price Guarantee comes in addition to the £400 Energy Bills Support Scheme, and the most vulnerable UK households will continue to receive £1,200 of support provided in instalments over the year.
Following a consultation, Ofgem has also confirmed that it will change the frequency at which the price cap is set to every three months, rather than every six. Ofgem stated that this change would provide much stability in the UK energy market, reducing the risk of further large-scale supplier failures, which cause huge disruption and push up costs for consumers.
The Government will also provide extra one-off payments of £900 for the eight million households on means-tested benefits, including Pension Credit; a second £300 Pensioner Cost-of-Living Payment; and another £150 for disability benefit recipients. The Chancellor also announced that the Government will provide £1 billion of extra funding by extending the Household Support Fund for another year.
Support for Businesses
While the majority of UK non-domestic customers are on fixed price energy deals, some are not. Businesses did not benefit from the Ofgem price cap.
The Government announced the new Energy Bill Relief Scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic customers whose current gas and electricity prices have been significantly inflated in light of global energy prices. This will include all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals. This support will be equivalent to the Energy Price Guarantee put in place for households.
This will see the Government set a Supported Wholesale Price which is a discounted price per unit of gas and electricity. This price is expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter.
It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial 6 month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November. If a business is not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly.
In April 2023, the EBRS will be replaced by the Energy Bill Discount Scheme (EBDS) will run until March 2024. The EBDS will support businesses and other non-domestic customers by providing a discount on gas and electricity unit prices. Eligible consumers will receive a per-unit discount to energy bills during the 12-month period from April 2023 to March 2024. The relative discount will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland these maximum discounts have been set at:
- electricity - £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.
- gas - £6.97 per MWh with a price threshold of £107 per MWh
Public Sector Pay Rises
Recognising the impact inflation has upon salaries, the Johnson Government announced pay rises for over 2.5 million public sector workers. The Government said that it had accepted the recommendations of NHS, police and teacher pay review bodies in full. Across the public sector, these are the highest uplifts in nearly 20 years.
- More than a million NHS staff – including nurses, paramedics and midwives – will receive a pay rise of at least £1,400 with lowest earners to receive up to 9.3 per cent.
- Police in England and Wales will get a £1,900 salary uplift, equivalent to five per cent overall pay award.
- Teachers across the country will benefit from pay increases of between five per cent and 8.9 per cent from September, intended to attract top talent and raise the status of the profession.
- All members of the Armed Forces will receive an increase in base pay of 3.75 per cent, with accommodation charges capped at 1 per cent.
Craig Whittaker MP
March 2023