Rishi Sunak is drawing up plans to increase the warm home discount by hundreds of pounds before cutting taxes to help with the cost-of-living crisis. The chancellor will take a two-pronged approach: a package to help with energy bills in July followed by general tax cuts in the autumn. From October the warm home discount will give three million of the poorest households in England and Wales £150 off their bills. Treasury officials have drawn up a range of options, including a one-off increase of £300, £500 or even £600 to help households to cope with soaring energy prices. The warm home top-up, which could cost more than £1 billion, would be directly funded by the government rather than levied on energy bills as under the present system. The chancellor is said to be attracted to the approach in part because there is less risk of it becoming permanent compared with a significant increase in benefits. Kwasi Kwarteng, the business secretary, has proposed raising the discount to £500.
Times 17th May 2022 read more »
During an appearance on Radio 4’s Today programme on 12 May, Conservative MP Robert Halfon wrongly claimed that green levies account for 25% of energy bills while arguing that they should be scrapped to help mitigate the impact of changes to the cost of living. Mr Halfon repeated this claim in a since corrected op-ed for The Sun, and it has also been made by others, including UKIP. The figure only refers to electricity bills, not energy bills in general, and includes some money spent on social schemes, not just environmental schemes. The term “green levies” is often used to refer to “environmental and social obligation costs”, which are contributions paid by consumers via larger energy suppliers towards various energy policies. UKIP’s post claims that these costs are used to “subsidise wealthy companies to build wind and solar farms.” While it is true that some of the money from these costs goes towards large-scale renewable energy projects, they are also used to fund a range of other environmental policies, including improvements to the energy efficiency of homes and business and Feed in Tariffs paid to households for surplus energy generated from renewable sources (like solar panels). So the money isn’t just spent on building wind and solar farms as UKIP claimed. The costs also pay for the Warm Home Discount, a social policy which offers rebates on energy bills to low-income households. So while green levies fall under the environmental and social obligation costs banner, they don’t make up the entirety of the costs as Mr Halfon suggested. According to the regulator Ofgem, an average direct debit energy customer under the default price cap announced on 1 April would pay £1,971 per year, of which £153 would be environmental and social obligation costs. Based on these figures, the costs account for around 7.8% of the bill—far less than the 25% figure claimed by UKIP and by Mr Halfon on the Today programme. This percentage is slightly lower for those who pay for their energy using standard credit or prepayment meters, as these bills are subject to a higher price cap. The percentage of energy costs accounted for by environmental and social obligation costs has actually decreased over the past year, from 12% in winter 2021/22 and 15% in summer 2021. This is because while the total price cap has increased, environmental and obligation costs have actually fallen slightly from £172 in summer 2021.
Full Fact 17th May 2022 read more »