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Citizens Advice response to Warm Home Discount: better targeted support from 2022

15 October 2021

Citizens Advice response to Warm Home Discount: better targeted support from 2022 [ 150 kb]

We strongly support the increased budget for the Warm Home Discount scheme, the move to use data matching to automatically provide the majority of rebates and changes to require almost all suppliers to take part in the scheme. These changes will ensure many more low income working age households - a group we’ve previously identified as under-supported with energy costs - are lifted out of fuel poverty. They will also make the process of receiving rebates simpler, and enable eligible consumers to have a much wider choice of energy deals without losing access to the scheme, potentially enabling further savings. 

In some areas we think BEIS should make changes to the proposals, in particular:

  • Despite improvements, the scheme is still only projected to have an overall fuel poverty targeting rate of 47%. BEIS should retain the flexibility to amend the eligibility criteria over time to improve this rate further and ensure the scheme funding is spent as effectively as possible to achieve its aim of reducing fuel poverty. This will also enable it to respond to the impact of other changes, such as the levels of relevant welfare benefits or levies on gas and electricity bills and how these are apportioned. 

  • The changes will be a big adjustment. Some consumers who may have been used to receiving rebates will no longer be eligible in future, and some people will need to take extra steps to maintain their eligibility. In both cases some people will need extra support. BEIS should work with industry and third sector organisations to communicate the changes and ensure support for people who are negatively impacted or need help. 

  • The continuing economic impact of Covid-19, rising energy prices and the impact of the changes to the scheme are all likely to cause high demand for the Initiatives component of the scheme in 2022/23. BEIS should consider rebalancing funding for this component of the scheme across the entire period so that more funding is available to support people in the first year of the changes. 

While we support the expansion of the scheme and recognise the need to proceed with these changes in a timely way to ensure support next winter, we are also mindful about the impact of policy costs on the affordability of energy bills. Government should carefully consider how to distribute policy costs in a fair and equitable way. We’ll set out our thinking in this area further in response to the forthcoming Call for Evidence on Energy Consumer Funding, Fairness and Affordability. BEIS should ensure that the design of Warm Home Discount is flexible to respond to any changes made as a result of this review. 

We’ve also called for a fair transition to net zero, with the right information, support and protection to help people make the necessary changes and ensure people who struggle to do so aren’t unfairly penalised. However, it’s unclear how the Warm Home Discount interacts with other policy changes that are being made, what intended role (if any) it plays in supporting people through the transition, and what gaps this leaves in terms of the wider support that will need to be made available. We’d welcome more clarity from the Government on this in future publications.

Update: Following our submission of this consultation response, energy prices have risen very rapidly, which will feed through into a much higher price cap next year. Analysis by Citizens Advice in October 2021 showed that this will mean households receiving Warm Home Discount will be hundreds of pounds worse off, even with the planned improvements to the scheme. We therefore called on the Government to urgently reopen its plans for the scheme, to ensure it meets its aims of supporting people at risk of fuel poverty. Further details are available here