Utility Week

UTILITY WEEK | MARCH 2022 | 13 Energy retail Support for billpayers is 'too late and too small' those on the lowest incomes will still have to nd several hundred pounds extra a year for their fuel bills. Andy Bell, who is now head of policy at consultancy Stonehaven, says the impact on low income earners could be "crippling". Many households will face "really hor- rible choices", says Foster: "That's a huge sum for people at the bottom of the income scale." Higher bills will also have health conse- quences, as households turn down the heat- ing, leading to a build-up of the damp and moisture that exacerbates respiratory condi- tions, says Bell. Responding to questions in the House of Commons following his announcement, Sunak was at pains to reassure fellow Con- servative MPs that the package would not only bene t those on the lowest incomes. The Council Tax rebate is an "overt" political "bribe" that will bene t the middle- income swing voters, who the Conservatives must assuage in order to avoid a bloodbath at May's council elections, says Bell: "They have to be seen to be give the least well-o… something but people receiving WHD aren't Conservative voters. The rst bill will land on the doorstep just a‰ er April." However, any political relief may be short- lived, especially if the level of wholesale energy prices remains elevated for several years, says Foster: "This will get them past May but drags on the misery of very high bills for several years." The government is likely to have to take a fresh look at its energy support package if this is the case, says Markall: "We need to look at whether it's enough if this crisis looks like it's going to be longer term than a six month to a year blip." If and when the support package is reviewed, the government should take a more thorough look at the structure of the retail market, says Markall: "We don't want to see further supplier failures because that pushes up customers' bills. The logic is to nd a more sustainable energy retail market. "The chancellor can't keep taking money o… customers' bills: we have to nd a long- term solution." "They could have been more generous because the Warm Home Discount is a targeted support mechanism – you are putting money into people's pockets who genuinely need it." Mike Foster, CEO, Energy and Utilities Alliance David Blackman Some households face the prospect of energy bills swallowing up nearly half of their post- housing income a‰ er the new price cap kicks in. That was one of the many bleak ndings outlined in an analysis, published in early February by the Joseph Rowntree Founda- tion charity, of the impact of the looming energy price hike on low-income households. Poorer single adult households will spend a "shocking" 43% on average of their income a‰ er housing costs on energy bills. The g- ure for lone parent families on low incomes is 22%. This is taking into a"count the package of measures to cushion the blow from the price cap hike, which were announced by Rishi Sunak within minutes of Ofgem's publica- tion (see Review, p6). In the context of what works out as a £9.1˜ billion package, it may seem a bizarre question to raise, but is it enough? Labour certainly didn't think so, with shadow chancellor Rachel Reeves imme- diately branding Sunak's announcement a "pale imitation" of the opposition's twin- pronged plan to axe VAT temporarily on energy bills while extending the Warm Home Discount (WHD) for low-income earners. Mike Foster, chief executive of the Energy and Utilities Alliance, and a former Labour MP, says: "They didn't do VAT, partly because the opposition were calling for it, and the realisation that once a tax is taken o… : it can't be put back on." Adam Bell, former head of energy strat- egy at the Department for Business, Energy & Industrial Strategy (BEIS), agrees. "There is no world in which we were going to have a massive taxpayer subsidy for everyone." Simon Markall, deputy director of exter- nal relations at Energy UK, says the pack- age announced this week was "de nitely welcome" and re¥ ects his body's call for a mixed response combining broad support for all household with more targeted help for vulnerable customers. But noting that the £200 chunk of the package won't begin hitting customers bank accounts until October, when many will already have had to pay bumped up bills, Bell says: "It looks too late and too small." There are also big question marks over the practicality of recovering sums from customers over several years, which have yet to be ironed out and may help to explain why the £200 payouts won't take place until October. Targeted support The size of payments is a particularly press- ing issue for those on the lowest incomes. Adam Scorer, chief executive of fuel poverty charity National Energy Action, branded Sunak's package as "broad and shallow" immediately following the chancellor's announcement. While the Council Tax rebate is no doubt well intentioned, it is not "particularly well targeted", says Foster: "No doubt there will be number of cases where people will be eli- gible who are nancially very well o… ." Bell agrees: "The middle classes don't need this bene t as much as lower income people do." The Institute for Fiscal Studies has calcu- lated that 44% of Band A to D households, who will receive the £150 rebate, are in the top half of the income distribution scale. Just over a third (38%) are in the bottom third of the household income distribution. The government has expanded eligibility for the WHD by around a third, meaning that approximately three million households will now receive the discount, which is targeted at those on the lowest incomes. However, the annual WHD payment has only gone up from £140 to £150, which is in line with the proposed increase set out in last year's Energy White Paper but much smaller than many commentators had expected in the run-up to Sunak's announcement. While acknowledging that it would be "churlish" not to welcome the extension of the scheme's eligibility criteria, the level of the increase could have been bigger, says Foster: "They could have been more gener- ous because it's a targeted support mecha- nism – you are putting money into people's pockets who genuinely need it." Even taking into account the measures announced by the chancellor last week, "They could have been more generous because the Warm Home Discount is a targeted support mechanism – you are putting money into people's pockets who genuinely need it." Mike Foster

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