Targeting support when energy bills rise in April

Targeting support when energy bills rise in April 190 KB

On April 1st 2022 under current plans, the energy price cap will increase by a predicted 57% to £2,000, bringing annual energy bills to a level we haven’t seen in many of our lifetimes.

Drawing on our expertise as the energy consumer watchdog and leading welfare advice provider, we recommend four steps to deal with the challenge over the coming year:

  1. Reduce the immediate immediate financial pressure low income households will feel in April. The best way of doing this quickly is through a one-off payment via the benefits system. The other possible mechanism is through energy bills. However, as we discuss below, there are significant challenges to this approach in the short term.

  2. Spread the cost of energy supplier failures over a longer period (2-3 years) rather than current plans (recovering the majority in 2022/3)

  3. Uprate benefits in line with current inflation, offset by lower increases in the following financial year (with the overall impact of the change being cost neutral).

  4. Recognise this crisis will stretch through to next winter - when the risks from cold weather are greatest - and start developing solutions now. By increasing and extending the Winter 2022 Warm Home Discount we can have the provision in place that will protect the lowest income households from the worst excesses of the coming price increases.

Using illustrative values from the Winter Fuel Payment for these schemes, our proposals would provide savings and income boosts to households on the lowest incomes worth £577 in 2022/23 or around £48 per month.