Chancellor announces additional measures to support with rising energy costs
Households across the UK will benefit from a £15 billion package of support following the introduction of a temporary windfall tax. SFHA's Research and Policy Lead, Cassandra Dove, takes a closer look at the announcement.
The UK Treasury has confirmed that a windfall tax on oil and gas companies will be introduced to help address the ongoing cost of living crisis. This temporary energy profits levy, which will tax profits at a rate of 25%, will help to fund additional financial support for households across the UK, in light of increasing energy costs. This includes changes to the previously announced Energy Bills Support Scheme and further one-off payments to qualifying households.
It was initially proposed that all households would receive a £200 rebate on their electricity bill from October 2022 but that this would need to be repaid over the following five years. A consultation on this proposed scheme closed earlier this week, and SFHA’s response raised concerns that the current proposals would be insufficient to support those most at risk. We also argued for low-income households to be exempt from repaying the levy and therefore welcome the announcement that the rebate will be increased to £400 and converted to a grant rather than a loan.
However, the Energy Bills Support Scheme remains a universal measure and had previously been criticised for failing to target the most vulnerable. The Chancellor has, therefore, announced further interventions, including a one-off payment of £650 for the lowest income families in the UK. This will be an automatic payment, delivered in two instalments, to 8 million households who receive Universal Credit, tax credits, pension credit and other means-tested benefits. A further £150 cost-of-living payment will also be provided to those with disabilities, while pensioners who already receive the Winter Fuel Payment will receive an additional £300.
These changes are welcome, but, with Ofgem predicting further increases in the price cap in October, which could see average dual fuel bills to rise to around £2,800, many low-income families are still going to struggle this coming winter. There will be particular challenges for those living in remote and rural Scotland and households who are reliant on electricity, with many expected to face costs closer to £4,000 following the next review.
Although today’s announcements are a positive step, energy prices are expected to remain high for the coming years. One-off payments may alleviate pressure in the short term, however, as outlined in our recent briefing, this will need to be coupled with other longer-term measures to effectively tackle fuel poverty in the social housing sector. Along with the improvements to social security outlined by the Scottish Finance Secretary earlier this week, this will also require increased investment in frontline advice services, acceleration of social housing retrofit programmes and wider energy market reforms.