The three measures announced by the Chancellor to reduce the effect of the huge April 2022 rise in electricity and gas prices
On 4 February 2022 the Chancellor, Rishi Sunak, announced three changes to, as he put it, 'take the sting' out of rising electricity and gas bills. They are
- £200 off every electricity bill in England, Scotland, and Wales from October 2022 to be repaid by a £40 surcharge on every electricity bill every year for the next five years starting in April 2023.
- £150 off one council tax bill in April 2022 for homes in England in council tax bands A, B, C, and D.
- An improved Warm Home Discount scheme for the winter of 2022/23
The Chancellor claims that the package will cost £9.1 billion. But that includes £6 billion which will be lent to energy companies so they can take £200 off one electricity bill this autumn. That will be repaid over five years. So the net cost is a lot less.
Updated 2 April 2022
£200 off one electricity bill
In the autumn of 2022 there will be a £200 deduction from one domestic electricity bill. It will be applied by all energy providers in England, Scotland, and Wales. It cannot be refused - it will just appear on the bill. It is called the Energy Bill Discount Scheme. There will not be a deduction from gas bills.
If your bill is for less than £200 any credit balance will be carried forward to the next so you will get the full amount.
It will be up to individual energy suppliers how they amend monthly direct debits for those who pay that way.
The 4.5 million homes which have a prepayment meter will get the full deduction. If they have a smart meter it will normally be credited automatically. People who do not have a suitable smart meter or still have a meter where they have to pay to put credit on a token will normally get a voucher to use when they charge it up. This will be sent by email or post. Alternatively, it may be paid through what is called a Special Action Message (SAM) to retailers they use to top up their account so the credit can be applied then. If all else fails, they will get a cheque in the post. Everyone on a prepayment meter will get the full £200 deduction.
People who are on a fixed price contract will get the £200 discount. It is not clear how that will be paid.
It seems more likely now that the £200 discount will be paid before VAT is applied to the bill.
The Government will lend energy suppliers the money to give the discount.
£40 a year repayment over five years
The £200 credit will be taken back through a £40 addition to every domestic electricity bill in 2023/24 and the next four years ending in 2027/28.
The Chancellor told Parliament it will "automatically be repaid from people's bills in equal £40 instalments over the next five years". In a press conference he said the "discount will then be automatically repaid from people's bills over the next five years in equal instalments of £40 a year, starting next April."
Exactly when and how this repayment will be taken has not been finalised. In a Factsheet the Treasury said "it is expected to be reflected as an increase to standing charges on bills". And the Treasury has now told me "We expect for most energy customers, suppliers will reflect this as a standing charge on electricity bills. This means the £40 per year will be evenly distributed across the year. Households will not repay the £40 in a lump sum unless they choose to pay their bills annually."
If that happened it could add £40 a year or 10.96p a day (including VAT) to the standing charge on electricity bills.
It is not clear yet how energy suppliers will amend monthly direct debits for those who pay that way. Nor is it clear how it will be deducted from those with a prepayment meter.
People on a fixed price contract will also have the extra £40 repayment added to their bills.
Energy suppliers will use the amounts added on to bills to repay the Government loan given to make the initial £200 discount.
All these tricky points will be dealt with in a consultation in the spring on exactly how the Energy Bill Discount Scheme will work. It will be run by the Department for Business, Energy and Industrial Strategy.
The Northern Ireland Executive will be given around £150 million by Westminster to implement a similar £200 discount off one electricity bill. It will be expected to repay it through £40 additions to bills. But it can make its own decisions. There is no price cap in Northern Ireland and energy prices have been rising as the wholesale cost of gas has increased.
The £200 discount is not a personal loan, or a loan attached to a property or to a meter. It will simply be taken off every bill. Similarly, the £40 extra will simply be added to every bill once in each of the next five years. That will create some unfair situations.
Young people living with parents in the autumn of 2022 will not benefit from the discount. But when they move out and live independently they will pay the £40 a year extra on their electricity bills. On the other hand, people who are living independently and get a £200 discount but then move in together will only pay the extra £40 between them.
Each year the number of domestic electricity meters grows. In the year to September 2021, for example, official figures show that the number grew by 313,621. That is fairly typical. By October 2022 there will be around 27,000,000 domestic electricity meters. If that number grows by 300,000 a year there will be 28,500,000 by 2027 when the last £40 repayment is collected. The energy companies will have collected £180 million - about 3% - more than they paid out in 2022. The Treasury has now told me "If the number of domestic electricity meters grows the amount paid back by households will be slightly lower."
Tenants who have their own rooms in multi-occupied houses do not pay for their electricity directly. The landlord pays and charges them. The landlord will get the £200 discount and have to meet the £40 repayments. It will be up to the landlord whether either is reflected in rents.
Leaseholders or tenants in heat network or communal heating schemes will get the discount off their individual electricity bill. Where they do not have individual electricity accounts, the Treasury says it will be consulting "to ensure maximum eligibility".
On VAT the treasury says "Electricity bills are subject to VAT at 5%. This currently applies to levies and all other inputs to the bill. Government will work closely with industry and consumer groups on this issue through a public consultation in the Spring."
There are more details and a discussion of exactly what the discount and how the finance works by Joe Malinowski on the energyscanner website.
£150 council tax rebate in April 2022
A £150 rebate will be given to some householders in April 2022. This rebate applies to England and only to people living in a home in council tax bands A to D. Your bill will tell you which band your home is in.
People in Band E properties who have their Council Tax bill reduced to a Band D bill through the Disability Reduction Scheme will be eligible for the £150 rebate payment.
Households where everyone is severely mentally impaired or all under the age of 18 and people in granny annexes who are exempt from council tax also be entitled to the discount.
The rebate will not be paid for second homes or empty properties.
The status of the property is what it was on 1 April 2022.
This £150 will not have to be repaid.
Local councils will be responsible for paying the rebate. It will not be a deduction from the bill, it will be a payment from the council. People who pay their council tax by direct debit will get the money paid into their bank account automatically. They should be paid in April. Those who do not pay by direct debit will be asked for their bank details but that could delay the payments. They could speed up the process by setting up a direct debit now.
The £150 discount will be given in full after any other deductions such as the 25% discount for a single person. It will be given where the council tax due is less than £150 even if it is zero. More than a million pensioners on pension credit for example have their council tax reduced to zero through council tax reduction. They are still liable for the tax but it is reduced to zero. They will get the full £150. The local council will contact them to get their bank details or they may be sent a cheque. How this works will be up to local authorities. People in that position should contact their council to find out more. The Treasury hopes it will all be sorted by May.
Students in halls of residence will not get the rebate.
The rules about houses or flats occupied by students are complex.
A student who lives alone or two students living together with no one else in a self-contained flat or house is exempt from council tax but will get the rebate. They should contact the council to let it know their circumstances. See this guidance paragraph 11.
If three or more students live in a house share then the house is exempt from council tax. They may or may not get the rebate. If it counts as a House in Multiple Occupation they do not get the rebate. That normally means they have their own independent bed-sitting rooms. But if they just share the whole house then they should get the rebate.
The guidance covering these circumstances is in paras. 11 and 12. Homes lived in entirely by students are in exemption class N.
Students should contact the council but some councils have said they are still struggling with how to deal with these issues.
Some groups in England will not get the £150 rebate
- People in England who live in a property in band E, F, G, or H will not get the £150 rebate. That means many low-income pensioners living in home in Band E to H will not get it.
- Some houses occupied by students.
- Tenants who pay the council tax as part of their rent will not get the rebate. It their landlord gets it they may not pass it on.
To help these groups each council in England will be given a share of a £144 million fund which it can use to provide discretionary payments. On average they will get £467,500 which would enable them to give the full £150 to only 3000 or so people in their area. The mechanism for how this fund will work has not been worked out but it is likely that each council will have discretion to set different rules. They will be able to choose whether to pay the whole £150 or a lower amount.
The Department for Levelling Up, Housing and Communities has set out further guidance and also a more detailed Q&A. At times they may seem to contradict each other.
Scotland, Wales, and Northern Ireland
The Westminster government will give the devolved authorities money "to enable them to provide similar support". Scotland will get around £290 million, Wales £175 million and Northern Ireland £100 million. Ministers in Scotland and Wales have questioned whether this money is extra or merely re-allocated from other budgets. In Northern Ireland, where there is no council tax, the rebate will probably be given to ratepayers.
The Scottish and Welsh governments have both announced their £150 rebate will go to two groups of households.
- Every householder in a band A, B, C, or D home, and
- Every householder in a band E or higher home who gets council tax reduction on grounds of low income.
Both governments have also announced that there will be a discretionary fund to help others who are in fuel hardship. Ask your local council about what extra help there may be.
Some councils in Scotland may pay the rebate as a deduction off the council tax or paid direct to the householder.
In Northern Ireland no scheme to help with rates has been sorted out. With elections and the conflict over the First Minister this may not be resolved for some time.
Warm Home Discount Scheme
The Warm Home Discount scheme for England and Wales will be changed for the winter of 2022/23. The discount will be raised from £140 to £150 and expanded to include more households. But some households who received the money last winter will not get it in 2022/23. They include 290,000 households where someone receives DLA or PIP and 50,000 families with young children. It will be paid on top of the new measures announced above.
Last winter the scheme applied in England, Wales, and Scotland but in Winter 2022/23 Scotland will have its own scheme. There will be a separate consultation on this.
The new scheme
There will be two ways to be eligible for the new scheme.
Low income pensioners - Core Group 1
In the new scheme pensioners who get the guarantee element of pension credit will automatically qualify for the discount. They will be aged 66 or more and usually have an income of less than £182.15 a week (£278.70 for a couple). They do not have to claim. They will now be called Core Group 1.
Other households - Core Group 2
Anyone not in Core Group 1 may be eligible for the discount if
- they get a means-tested benefit (and in some cases have an income below a certain level) and
- they live in a home that has high energy costs
The controversial change is that only those with 'higher energy costs' will qualify. That will exclude an estimated 290,000 people who get Disability Living Allowance or Personal Independence Payment who live in a building that does not have high energy costs. That is about 35% of the 810,000 who qualified last winter.
The method of assessing high energy costs will also be controversial as it will be done automatically and related to the building not the people who live there. So a disabled person who needs warmth or to keep essential medical equipment going may be excluded.
The Government says that 750,000 more people, many of them on low incomes who live in hard to heat buildings, will get help and that the cost will increase by £125m. People in both elegible groups will get the payment automaticaly and there will be a procedure for those excluded on hard-to-heat grounds to challenge the decision. Suppliers with fewer than 50,000 will not have to iffer the scheme - last winter it was fewer than 150,000. From 2023/24 that will will be reduced to fewer than 1000 customers.
You can read the plans for Warm Home Discount from 2022 and the impact assessment which measures the gains and losses in a fairly impenetrable way.
Winter Fuel Payment
The Winter Fuel Payment is paid to people throughout the UK who have reached state pension age. The qualifying age for the winter 2022/23 will be those born on 25 September 1956 or earlier. The standard rate is £200 per household; if two or more people qualify in a household they get £100 each. If someone is aged 80 or more - which means born on 25 September 1942 or earlier - the payment is £300 for the household. It is normally paid automatically. But people who do not receive state pension or other state benefits should apply or they may not be included. Once paid it does not have to be claimed in future years.
See Winter Fuel Payment at gov.uk.
The information in this blogpost has been carefully checked with published sources, Treasury officials, and others. I am confident it is as full and accurate as it can be. It will be updated when fresh information comes to light. However, I take no responsibility if people rely on it and suffer any loss. Always check with official sources before taking action.
2 April 2022