The First Minister will convene an urgent summit with energy supply companies and consumer groups later this month, to discuss how advice and support for people struggling with energy bills can be improved.
The summit will consider what collective action can be taken by government, energy companies and the third sector to help businesses and consumers access advice, and get support with debt issues.
Scotland’s major energy suppliers including Scottish Power, OVO Energy, Centrica, Octopus and E.ON, as well as industry bodies and key consumer and poverty organisations will attend.
The summit follows last week’s meeting of the Scottish Government Resilience Committee on the cost living crisis and will take place ahead of OfGem’s next energy price cap announcement on 26 August.
First Minister Nicola Sturgeon said: “I know that this is an incredibly unsettling time for households and energy consumers across Scotland and the Scottish Government will continue to do everything we can to support those affected.
“There is a not a single solution to this problem and government, industry and the third sector in Scotland needs to work collaboratively together to ensure the right support is in place for householders and businesses during this challenging winter. This could include improving the availability of help and advice and considering a more compassionate approach to debt management.
“However, it remains the case that the powers and resources needed to tackle this emergency on the scale required – access to borrowing, welfare, VAT on fuel, taxation of windfall profits, regulation of the energy market – lie with the UK Government.
“Only the UK Government can access and make available resources on the scale required. They need to take action, now. As I said last week, a first step would be to cancel the energy price cap rise this autumn.”
Peter Kelly, Director, The Poverty Alliance said: “We are pleased that the First Minister will be convening this summit of energy companies, along with the Poverty Alliance and Energy Action Scotland.
“Across the country, people are increasingly being swept up amid a rising tide of hardship. But with the energy price cap due to increase in October, that tide threatens to become a flood.
“Households up and down Scotland are terrified of what the colder months will bring and the likelihood is that – without further action – lives and life chances will be at risk. The situation could scarcely be more urgent.
“But it is a situation we can do something about, by taking action to protect people most at risk of poverty and deeper hardship. It is that much-needed and urgent action that we are hoping the summit can bring about.”
Frazer Scott, CEO of Energy Action Scotland said: “With our colleagues at the Poverty Alliance, we welcome the First Minister’s intervention in gathering energy companies together to talk about how we can best support households struggling to afford spiralling energy bills.
“Fuel poverty will affect over one million Scottish households this winter requiring urgent intervention focussed on targeting those most in need.
“Cold, damp homes affect health and wellbeing and will put thousands of lives at risk as well as adding additional pressure to the NHS, making this a vital intervention for Scotland.”
The Scottish Government estimates that 906,000 or 36% of all households will be in fuel poverty in October 2022, based on an Ofgem price cap of £2,800 and taking into account previously announced government mitigations.
The week’s economic news has again been dominated by the implications of inflation, and in particular of huge increases in household energy bills.
Projections for the energy price cap have again been revised up. The latest projections indicate that the price cap could reach around £3,500 in October, and increase further to around £4,400 in April. It is incredible to think that the cap was £1,277 earlier this year (having now increased to £1,971).
Such levels of increases will have severe impacts on households. In Scotland, a quarter of households were already in fuel poverty in 2019, the year in which the Fuel Poverty (Targets, Definition, Strategy) (Scotland) Act received Royal Assent.
That Act determines that a household is in fuel poverty if two conditions hold:
First, that in order to heat the home to a satisfactory level, the household would need to spend more than 10 per cent of its net income on fuel; and
Second, if, after deducting those fuel costs, and other essential costs associated with disability, care needs or childcare, the household’s income is below 90% of the UK Minimum Income Standard.
The definition therefore is not based on what a household actually spends on fuel, but on what they need to spend to heat their home to an acceptable level.
The daunting projections for energy bills will undoubtedly lead to a substantial increase in fuel poverty throughout 2022 and 2023. Quite how many households will be in fuel poverty according to the official definition will depend in part on what further action the government decides to take. But it is clear that a broad swathe of low and middle income households will be placed under severe financial strain.
The political debates this week have again focussed both on the level and targeting of further support the government should provide.
There is a clear case for targeting. In Scotland, almost all households (96%) with incomes below £200 per week were already in fuel poverty in 2019; but amongst households whose incomes were above £500 per week, fuel poverty rates were negligible. Further targeting via the social security system therefore seems appropriate.
But it should also be remembered that the financial distress caused by the energy price crisis will extend well beyond the poorest, and further broader-based support would also be justified. This is where the delivery mechanism becomes more challenging. Government could subsidise bills universally, although this would be expensive, providing support to some households whose need for support is relatively less.
But trying to provide support to low and middle income households only is tricky. Using the council tax system is far from ideal given the weak links between council tax band and income.
Households in bands A and B are relatively more likely to be in fuel poverty, but over 14% of Scottish households in bands F, G and H were in fuel poverty in 2019. On this basis, using council tax band as a way to limit the breadth of financial support provided has clear disadvantages.
It now seems unlikely that the UK government will announce its next round of support for households until the Conservative leadership contest has concluded. Depending on the mechanisms it chooses for delivering that support, the Scottish government may be allocated additional resources of its own which it can prioritise as it deems fit, or the support may be delivered at UK level (via energy bills or the social security system).
The Prime Minister, Chancellor Nadhim Zahawi and Business and Energy Secretary Kwasi Kwarteng met industry leaders from the electricity sector yesterday to discuss what more they can do to help people struggling with rising energy prices– but the meeting did nothing to resolve the impending crisis.
The Prime Minister, Chancellor, Business and Energy Secretary stressed the need to act in the interest of the country in the face of rising energy prices caused by Putin’s illegal invasion of Ukraine and how vital it was that the Western world continued to stand by the Ukrainian people during their battle for survival.
The Chancellor and energy firms agreed to work closely over the coming weeks to ensure that the public, including vulnerable customers, are supported as unprecedented global events drive higher energy costs.
Government support worth £37 billion is being provided this year to help people with the rising cost of living, including £1,200 for the most vulnerable households over the course of the year and £400 discounted off everyone’s energy bills from October.
It was noted that the market is not always functioning for consumers, and extraordinarily high bills will ultimately damage energy companies.
As set out in the Energy Security Strategy, the Government has launched a consultation to drive forward market reforms and ensure the market works better for consumers. Discussion focussed on how Government and industry can collectively drive forward reforms to ensure the market delivers lower prices.
The Prime Minister, Chancellor and Business and Energy Secretary emphasised the importance of investing in North Sea oil and gas, renewables, biomass and nuclear to strengthen our domestic energy security.
The Chancellor added the Government continues to evaluate the extraordinary profits seen in certain parts of the electricity generation sector and the appropriate and proportionate steps to take.
The Prime Minister set out that it will be for the next Prime Minister to make significant fiscal decisions.
Prime Minister Boris Johnson said: “Countries around the world are feeling the impact of Putin’s damaging war in Ukraine. We know that this will be a difficult winter for people across the UK, which is why we are doing everything we can to support them and must continue to do so.
“Following our meeting today, we will keep urging the electricity sector to continue working on ways we can ease the cost of living pressures and to invest further and faster in British energy security.
“We are continuing to roll out government support over the coming months, including the second £324 instalment of the cost of living payment for vulnerable households, extra help for pensioners and those with disabilities, and the £400 energy bills discount for all households.”
Chancellor of the Exchequer, Nadhim Zahawi, said: “This morning I hosted industry leaders from the electricity sector to discuss what more they can do to work with Government and act in the interest of the country in the face of rising prices caused by Putin’s illegal invasion of Ukraine.
“We have already acted to protect households with £400 off energy bills and direct payments of £1,200 for 8 million of the most vulnerable British families. In the spirit of national unity, they agreed to work with us to do more to help the people who most need it.”
The meeting was attended by representatives from:
EDF
RWE
E.ON
Drax
Orsted
Uniper
National Grid
SSE
ScottishPower
Centrica
Octopus Energy
Vitol
Intergen
Greencoat Capital
Energy UK
Scottish Government Resilience Room convened to discuss ‘cost emergency’
The First Minister chaired the Scottish Government Resilience Committee yesterday (August 11) to discuss urgent steps to mitigate the growing cost emergency which is affecting people and businesses.
Ministers assessed the current situation and likely scenarios in the months ahead and agreed a number of immediate actions. The Scottish Government will:
Continue to maximise the direct financial assistance available to those most in need, principally through ongoing work to extend eligibility for and increase the value of the Scottish Child Payment
Undertake an emergency budget review to assess any and all opportunities to redirect additional resources to those most in need, reduce the burdens on business and stimulate the Scottish economy
Consider urgently all options within devolved powers for regulatory action to limit increases in costs for people, businesses and other organisations
Bring together energy companies, banks and food retailers to examine what further help can be provided by these businesses to limit cost increases and protect those most vulnerable
Work with partners to strengthen the safety net of emergency food/fuel provision, prioritising a ‘cash first’ approach
Provide further advice to households on using energy more efficiently and reducing consumption
The Resilience Committee will meet on a weekly basis for the foreseeable future to oversee and direct progress on these immediate actions and keep under ongoing review any further steps that the Scottish Government can take.
In addition to doing everything possible within its powers, the Scottish Government is renewing its call for urgent and substantial action from the UK Government including:
An immediate doubling of the direct financial support already provided, with payments made by October. It is estimated that for an out-of-work couple with two children, the payments already announced by the UK Government fall around £1,600 short of meeting the recent changes to benefits and living costs – a gap that must be filled
Cancellation of the forthcoming increase in the energy price cap, followed by urgent work between the government and energy companies on energy market reforms and associated financing options to ensure sustainable costs for consumers in the long term
The urgent introduction of an energy price cap for Small and Medium Enterprises
Support for business to prevent closures due to energy price rises and investment in economic stimulus to minimise the scale of the projected recession
A further windfall tax to ensure nationalisation of the profits being made out of the current pressures
Additional funding to support public sector pay increases and protect the recovery of public services from the pandemic
The First Minister said: “It is clear that the UK currently faces a rapidly escalating emergency that goes beyond simply the cost of living and is now a more general cost of everything crisis. This emergency may be of a different nature to the COVID-19 pandemic, but it is on a similar scale.
“In the absence of substantial and urgent action, this emergency will cause acute deprivation and suffering. It will affect access to practical necessities for millions of people across the UK. Bluntly, it will cost lives.
“To illustrate the severity of the situation, the Scottish Government estimates that, even with current UK Government mitigations, at least 700,000 households in Scotland – 30% of all households – will be living in extreme fuel poverty by October. That number could be even higher, if the Ofgem price cap for October 2022 is above £2,800.
“It is essential, therefore, that the response from government at every level is commensurate, in scale and speed, to the nature and magnitude of the emergency.
“In developing a response, governments must first and foremost address immediate need. We must all focus on supporting individuals, businesses and jobs by addressing the principal root causes of the problem.
“Scottish Ministers are clear that the powers and resources needed to tackle this emergency on the scale required – access to borrowing, welfare, VAT on fuel, taxation of windfall profits, regulation of the energy market – lie with the UK Government. This is reflected in the actions we have proposed and set out today.
“At the same time, the Scottish Government will continue to do everything within our resources and powers to help those most affected.”
Edinburgh Pentlands MSP Gordon Macdonald has welcomed the planned introduction of the new Low Income Winter Heating Assistance benefit to help households both across the Edinburgh Pentlands constituency and the wider city pay their energy bills.
The support is being introduced by the SNP Scottish Government and will guarantee an annual payment of £50 to around 400,000 low income households from February 2023.
It replaces the UK government’s Cold Weather payments which were only triggered during a ‘cold spell’ of seven consecutive days below zero degrees, whilst the new payment from the Scottish Government will provide a reliable, stable guaranteed payment in winter, no matter the weather.
It will be the thirteenth social security payment introduced by the SNP Scottish Government and will be only available in Scotland.
Commenting, Gordon Macdonald said: “The SNP Scottish Government is providing a guaranteed payment of £50 to low-income households across Edinburgh to help pay their energy bills every winter, starting in February 2023.
“Once again the SNP Scottish Government is stepping up to support households within its limited budget, and despite the majority of powers lying with the Tories at Westminster.
“The Scottish Government’s annual £20m investment will mean households will get an automatic payment. The UK Cold Weather payments only reached 11,000 households in 2021/22.
“As the Scottish Government continues to step up and provide support to households across Scotland, it does so with one hand tied behind its back by the UK Tory government.
“That is why it is only with the full powers of independence can we start to build a fairer, more equal country.”
Households are being encouraged to take a meter reading today (31st March) before an energy price hike comes into effecton 1st April.
It is advised to supply a meter reading to ensure that you get the current, cheaper rates for all the energy you have used prior to this date. You may be charged for energy used prior to the increase at the new higher unit prices if you do not supply a reading.
Ofgem is increasing its price capfrom the 1st of April. For those on a default tariff who pay by direct debit, the price cap is going up by almost £700.
However, if you take a meter reading on 31st of March and provide this to your energy supplier, you should be charged correctly (at the lower rate) for energy already used.
How Do I Submit a Meter Reading?
There are various ways you can submit a reading:
· Online or via the energy supplier’s app
· Through online chat with the supplier
· Sending a text
· Contacting the supplier via telephone (this is sometimes an automated line).
More information on how to provide a meter reading to your supplier can be found on their website, or on statements or bills you have received from them.
Smart Meters
Smart meters send automatic readings to your energy supplier. Depending on how a smart meter is set up, it may not automatically send a reading on the 31st of March. This is because in many cases the system will be set up to send a reading on a set date once a month.
You may be able to change the settings – some meters can take readings every half hour – or, failing that, log into your account and submit your reading that way.
For example, British Gas have insisted that its smart meters take readings at set times determined by the customer, but there is nothing to stop them logging in and submitting an additional one on the 31st of March.
If, for whatever reason, you have a problem trying to submit your readings, you can take photos on the day that clearly show the reading, and the meter serial numbers.
energyadvice.scot
As the cost of living crisis bites, it’s important to ensure you’re not paying more than you should be for your energy. One of the easiest ways to do this is through taking and submitting meter readings.
While smart meters are taking the chore out of remembering to read your meter, not every household has them installed. It’s therefore important to know how to take your meter readings and to let your supplier know what they are.
Energy bills are confusing if you don’t understand what the numbers mean. Luckily, Energy Saving Trust have this great blog that breaks down your energy bills.
If you don’t give your energy supplier meter readings, they guess how much you’ve used based on the information about what that property has used in the past. This is known as an estimated reading. Your bill may show ‘estimated’ or ‘E’ on the bill you receive. .
Estimated readings can be over or under what you’re actually using and could lead to problems with your energy bills later down the line. If your energy supplier has underestimated how much energy you’re using, you could end up owing money that you haven’t budgeted for. On the other hand, if your energy supplier has overestimated how much energy you’re using, you could end up paying higher bills than you need to.
To avoid this, take accurate meter readings and provide them to your energy supplier, who should then send you an accurate bill. Look at the reading number on your meter and write it down. Many energy companies allow you to submit these readings online or provide an automated phone service to let you do this.
If you’re struggling to keep warm at home and keep up with your energy costs, we’re here to help you. As well as tips on how to save energy and advice on making your home warmer, we can check if you’re eligible for special discounts from energy suppliers and other funding. We can also help you get a benefits and tax credit check so you’re not missing out on additional income.
Give us a call on 0808 808 2282 or use our contact form to get in touch via email.
£33,000 funding secured from the Scottish Government to help with fuel poverty debts
Port of Leith Housing Association (PoLHA), in partnership with Changeworks, has secured £33,000 in funding from the Scottish Government and Scottish Federation of Housing Associations to support tenants with existing fuel poverty related debts.
The fund ensures we can support up to 50 households with this issue until the end of March 2022.
Currently, 21% of Edinburgh households live in fuel poverty, rising to 44% for social housing tenants. In Leith, 24% households live in material deprivation which has been further exacerbated by the pandemic.
Affordable Warmth Services Team Manager at Changeworks, Lisa Bygate, commented: “Through our work on the Link-Up Leith project we have seen increasing demand for support as people find themselves struggling with high bills and fuel debt.
“We are now seeing the highest incidences of households at risk of disconnection since the project started. This much welcomed funding will support people living on low incomes to have improved life skills and confidence to tackle fuel poverty issues themselves.
“We are delighted to be strengthening our partnership with Port of Leith Housing Association to provide support to their tenants and Leith residents with energy debt. We will be working closely with their welfare rights staff and other members of the Link-Up Leith project to identify and provide assistance to those who need it.”
PoLHA Group Chief Executive, Heather Kiteley, said: “I’m thankful that we have secured this funding to help our community during this time of rapidly escalating fuel costs.
“We are committed to ensuring our tenants’ welfare and I’m proud that the PoLHA Group has been able to react so quickly to our tenants’ needs and provide vital support.”
Eligible tenants will be identified for this grant through PoLHA’s Tenant Advice Service and Changeworks existing Link-Up Leith project run in partnership with Edinburgh Community Food and Stepping Stones.
Changeworks will also identify people eligible for support through referrals to their Affordable Warmth Service.
How to apply
Tenants can apply for the fund by speaking to their Housing Officer or our Tenant Advice team who can make a referral to Changeworks.
Other services
PoLHA offers the following support services to social housing tenants: welfare benefits advice, money advice and tenancy sustainment advice.
“We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet”
Record increase in global gas prices sees energy price cap rise of 54%
Ofgem knows this rise will be extremely worrying for many people
Customers struggling to pay their energy bill should contact their supplier to access the help available
The energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2,017.
The increase is driven by a record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year.
It will affect default tariff customers who haven’t switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market.
The price cap is updated twice a year and tracks wholesale energy and other costs.
It stops energy companies from making excessive profits, ensuring customers pay no more than a fair price for their energy.
The price cap allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas.
Since the price cap was last updated in August, the current level does not reflect the unprecedented record rise in gas prices which has since taken place.
Under the price cap mechanism, energy companies will be allowed to pass on these higher costs from April when the new level takes effect.
This is because energy companies cannot afford to supply electricity and gas to their customers for less than they have paid for it.
Over the last year, 29 energy companies have exited the market or been put in special administration in the wake of soaring global gas prices, affecting around 4.3 million domestic customers.
Jonathan Brearley, chief executive of Ofgem, said:“We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.
“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.
“Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.”
Ofgem will tomorrow announce further measures to help the energy market weather future volatility by increasing financial resilience and have the flexibility to respond so that risks are not inappropriately passed on to consumers.
The further measures include enabling Ofgem to update the price cap more frequently than once every 6 months in exceptional circumstances to ensure that it still reflects the true cost of supplying energy.
Help available for customers:
If customers are struggling to pay for energy bills, they should contact their energy supplier as soon as possible. Depending on their circumstances, customers may be eligible for extra help with their energy bills or services, such as debt repayment plans, payment breaks, emergency credit for prepayment metered customers, priority support and schemes like the Winter Fuel Payment or Warm Home Discount rebate.
Breathing Space Scheme: This is a scheme to give households time to receive debt advice and find a solution to sort out their debt problems. Breathing space will last for 60 days as long as applicants remain eligible during which time all creditors who have been included will be informed and must stop any collection or enforcement activity. Once the breathing space ends, creditors will be able to collect the debt in the usual way. Call the National Debtline on Freephone 0808 808 4000 or visit www.nationaldebtline.org
The Citizens Advice consumer service can provide advice on how customers can resolve problems with their energy provider. You can contact Citizens Advice via webchat, or by calling 0808 223 1133. For complex or urgent cases, or if a person is in a vulnerable situation, they may then be referred onto the Extra Help Unit.
2. Ofgem will announce further measures tomorrow including:
Introducing an uplift in the wholesale cost allowance in the price cap: after reviewing the evidence, Ofgem has decided that the existing price cap methodology did not appropriately account for the additional wholesale energy costs energy companies have incurred during the current price cap period following the unprecedented scale of wholesale energy prices and volatility. This adjustment represents less than 10% of the overall price cap increase.
Changing licence conditions to give Ofgem the more flexibility to change the price cap level if needed in between the regular six-monthly cap updates: Ofgem has set ourselves five tests which mean we will only expect to use the power in exceptional circumstances.
Further reforms to the price cap from October: In December we set out three options to make the price cap more robust to high and volatile wholesale energy costs while preserving as far as possible the benefits of the price cap for consumers. The consultation published tomorrow will include all three options, with quarterly updates as our preferred option
Breakdown of costs in the energy price cap
Dual fuel customer paying by direct debit, typical energy use (GB £)
*Network costs: The main driver of this increase is the recovery of Supplier of Last Resort (SoLR) levy costs (£68). A supplier acting as a SoLR can make a claim for any reasonable additional, otherwise unrecoverable, costs they incur. These levy claims are paid to energy companies by the distribution network companies and recovered from consumers via their charges.
5. The charts below show the wholesale prices that are used to determine the wholesale cost allowance within the price cap from spring 2018 ahead of the introduction of the price cap in January 2019.
Wholesale costs make up the majority of a customer’s bill. An efficient supplier will purchase energy for their customers on the wholesale market in advance of when they need to supply that energy.
This purchasing strategy is reflected in how the wholesale allowance is calculated within the price cap. We observe the forward-looking energy contracts that energy companies typically purchase over time and combine these to determine the wholesale cost allowance within the price cap.
We do this twice a year when we update the price cap in August for the winter period (October – March) and in February for the summer period (April – September) based on the price of these forward-looking energy contracts over the previous six months.
The fixed horizontal line shows the average wholesale cost allowance for each 6 month price cap period based on the price of the relevant forward looking energy contracts (the jagged line).
The recent spike in the prices of relevant forward looking energy contracts over the last 6 months can be clearly seen. The scale and pace of wholesale price increases has resulted in a big increase in the wholesale cost allowance for the price cap level for summer 2022.
Wholesale gas price costs in the energy price cap
Pence per therm
Wholesale electricity price costs in the energy price cap
Pounds per megawatt hour
Data sets behind these graphs are proprietary and can be sourced from ICIS.
Chancellor’s statement – Energy Price Cap
Statement, as delivered by Chancellor Rishi Sunak, on 3 February 2022:
Mr Speaker,
The UK’s economic recovery has been quicker and stronger than forecast.
In the depths of the pandemic, our economy was expected to return to its pre-crisis level at the end of 2022.
Instead, it got there in November 2021 – a full year earlier.
Unemployment was expected to peak at nearly 12%.
Instead, it peaked at 5.2% and has now fallen to just over 4% – saving more than 2 million jobs.
And with the fastest growing economy in the G7 this year…
Over 400,000 more people on payrolls than before the pandemic…
And business investment rising…it’s no wonder Mr Speaker, that borrowing is set to fall from £320bn last year …
… the highest ever peacetime level …
… to £46bn by the end of this Parliament.
As we emerge from the depths of the worst recession in 300 years, we should be proud of our economic record.
The economy is stronger because of the plan we put in place; because of the actions we took to protect families and businesses.
And that plan is working.
But for all the progress we are making – the job is not yet done.
Right now, I know the number one issue on people’s minds is the rising cost of living.
It is the independent Bank of England’s role to deliver low and stable inflation – and the Governor will set out their latest judgements at midday today.
And just as the government stood behind the British people through the pandemic…
… so we will help people deal with one of the biggest costs they now face – energy.
The energy regulator, OFGEM, announced this morning that the energy price cap will rise in April to £1,971 – an increase of £693 for the average household. Without government action, this would be incredibly tough for millions of hardworking families. So the government is going to step in to directly help people manage those extra costs.
Mr Speaker,
Before I set out the steps we are taking, let me explain what’s happening to energy prices, and why.
People’s energy bills are rising because it is more expensive for the companies who supply our energy to buy oil, coal, and gas.
Of the £693 increase in the April price cap, around 80% comes from wholesale energy prices.
Over the last year, the price of gas alone has quadrupled.
And because over 85% of homes in Britain are heated with a gas boiler, and around 40% of our electricity comes from gas, this is hitting households hard.
The reasons gas prices are soaring are global.
Across Europe and Asia, a long, cold winter last year depleted gas stores.
Disruption to other energy sources like nuclear and wind left us relying more than usual on gas during the summer months.
Surging demand in the world’s manufacturing centres in Asia…
… at the same time as countries like China are moving away from coal…
… is further increasing demand for gas.
And concerns about a possible Russian incursion into Ukraine are putting further pressure on wholesale gas markets.
And so prices are rising.
Mr Speaker,
The price cap has meant that the impact of soaring gas prices has so far fallen mainly on energy companies.
So much so, that some suppliers who couldn’t afford to meet those extra costs have gone out of business as a result.
It is not sustainable to keep holding the price of energy artificially low.
For me to stand here and pretend we don’t have to adjust to paying higher prices would be wrong and dishonest. But what we can do is take the sting out of a significant price shock for millions of families … by making sure the increase in prices is smaller initially and spread over a longer period.
Mr Speaker,
Without government intervention, the increase in the price cap would leave the average household having to find an extra £693.
The actions I’m announcing today will provide, to the vast majority of households, just over half that amount – £350.
In total, the government is going to help around 28 million households this year.
Taken together, this is a plan to help with the cost of living worth around £9bn.
We’re delivering that support in three different ways.
First, we will spread the worst of the extra costs of this year’s energy price shock over time.
This year, all domestic electricity customers will receive an upfront discount on their bills worth £200.
Energy suppliers will apply the discount on people’s bills from October.
With the government meeting the cost in full.
That discount will be automatically repaid from people’s bills in equal £40 instalments over the next five years.
This is the right way to support people while staying on track with our plans to repair the public finances.
And because we are taking a fiscally responsible approach, we can also provide more help, faster, to those who need it most – the second part of our plan.
We’re going to give people a £150 Council Tax rebate to help with the cost of energy, in April – and this discount won’t need to be repaid.
And I do want to be clear with the House that we are deliberately not just giving support to people on benefits.
Lots of people on middle incomes are struggling right now, too – so I’ve decided to provide the council tax rebate to households in Bands A to D.
This means around 80% of all homes in England will benefit.
And the third part of our plan will provide local authorities with a discretionary fund of nearly £150m…
… to help those lower income households who happen to live in higher Council Tax properties…
… and households in bands A-D who are exempt from Council Tax.
We’re also confirming today that we’ll go ahead with existing plans to expand eligibility for the Warm Home Discount by almost a third…
… so that 3m vulnerable households will now benefit from that scheme.
And that’s not all we’re doing to help vulnerable households.
We’re providing £3bn over this Parliament to help more than half a million lower income homes become more energy efficient, saving them on average £290 per year.
Increasing the National Living Wage to £9.50 an hour in April, a pay rise of over £1,000 for 2 million low paid workers.
And providing an effective tax cut for those on Universal Credit, allowing almost 2 million households to keep an average of £1,000 per year.
The payment through energy suppliers will apply across England, Wales and Scotland.
Energy policy is devolved in Northern Ireland, with a different regulator, and the government does not have the legal powers to intervene.
So we will make sure the Executive is funded to do something similar, with around £150m for Northern Ireland through the Barnett formula next year.
And because the Council Tax system is England only, total Barnett consequentials of around £565m will be provided to the devolved administrations in the usual way.
Mr Speaker,
I know that some in this House have argued for a VAT cut on energy.
However, that policy would disproportionately benefit wealthier households.
There would also be no guarantee that suppliers would pass on the discounts to all customers.
And we should be honest with ourselves: this would become a permanent Government subsidy on everyone’s bills.
A permanent subsidy worth £2.5 billion every year – at a time when we are trying to rebuild the public finances.
Instead, our plan allows us to provide more generous support, faster, to those who need it most, providing 28m households with at least £200, and the vast majority receiving £350.
It is fair, it is targeted, it is proportionate – it is the right way to help people with the spike in energy costs.
Mr Speaker,
Today’s announcements are just one part of the government’s plan to tackle this country’s most pressing economic challenges.
A plan for growth – with record investments in infrastructure, innovation and skills.
A plan to restore the public finances – with debt falling by the end of this Parliament.
A plan to cut waiting lists and back the NHS with £29bn over three years and a permanent new source of funding.
And, with the measures I’ve announced today – a plan to help with the rising cost of energy with £350 more in the pockets of tens of millions of hard working families.
That’s our plan to build a stronger economy – not just today but for the long term.
And I commend it to this House.
Commenting on the energy cap rise, interest rate rise and the Chancellor’s measures to address the cost of living crisis, TUC General Secretary Frances O’Grady said: “The Chancellor’s announcement is hopelessly inadequate. For most families it’s just £7 a week and more than half must be paid back.
“It’s too little, it’s poorly targeted, and it’s stop gap measures instead of fixing the big problems.
“Britain needs a pay rise. The best way to help families is to get wages growing again. But this government has no plan to end pay misery.
“Ministers should be getting urgent help to families that need it most through raising universal credit. And we need a windfall tax on the excessive profits from North Sea gas to cut bills and boost investment in affordable energy.”
Responding to today’s announcements on energy costs and the cost of living, Katie Schmuecker, Deputy Director of Policy and Partnerships for the independent Joseph Rowntree Foundation said: “The Chancellor has offered cold comfort to families in poverty, who are already rationing what they can spend on essentials such as heating and food.
“These families are now expected to find at least half of the eye watering increases in energy bills, when many are already getting into debt to keep their houses warm and food on the table.
“Three quarters of those who can claim the enhanced support are not in poverty. Meanwhile inflation is set to rise at more than double the rate of benefits. This support will not get people through the next few months and it will not protect those most at risk of hardship.
“People in poverty are hit hardest by all these pressures because our social security system is simply not offering adequate support, and until that changes they will continue to be exposed to every economic shock.
“The Chancellor has made his choice, the harder choices will now be coming for those who still can’t afford essentials for themselves and their families.”
University of Birmingham’s Harriet Thomson on the rise of energy price caps: “This news comes at a time when families across Great Britain have already been facing years of rapidly increasing energy prices, as well as chaotic energy market conditions with the collapse of around 20 energy supplies since January 2021 alone.
“Just last month, ONS data found that 2 in 3 adults said their costs of living had gone up in the past month, with 79% of those attributing blame to gas and electricity prices.
“We know from the extensive body of existing evidence on this topic that lower income households will be disproportionately hit by the price cap increase, risking pushing millions more into a situation fuel poverty.
“This will have serious consequences for physical and mental health, social isolation, and educational attainment, with households forced to make difficult everyday decisions over whether to ‘heat or eat’.
“Moreover, these price increases are likely to push more people into using risky and/or polluting alternative energy sources, such as DIY candle heaters that have been linked to house fires, burning scrap wood and other flammable materials, and digging up peat. As well as the obvious risks to human life, these approaches will also exacerbate climate change.
“It’s clear that energy companies are reeling from the potent combination of cash flow reductions due to pandemic-related economic pressures on families who are building up more energy debt, and the global gas crisis.
“But the answer is not to burden households with yet more costs. The energy market is broken and needs radical reform – now is the time for the UK government to show ambition and commitment to the nation by investing in deep retrofits of our old and leaky housing stock, and to rollout decentralised renewable energy systems at scale.”
The number of households suffering from ‘fuel stress’ – spending at least 10 per cent of their family budgets on energy bills – is set to treble overnight to 6.3 million households when the new energy price cap comes into effect on April 1, according to new research published today by the Resolution Foundation.
The research shows that the proportion of English households in ‘fuel stress’ – a general indicator of finding energy bills unaffordable and also the definition of fuel poverty in Wales, Scotland and Northern Ireland – is currently 9 per cent.
It is expected to leap to 27 per cent as a result of the energy price cap rising by more than 50 per cent this April to around £2,000 per year. Ofgem will announce the new price cap level on February 7.
Levels of fuel stress are set to be highest in the North East and the West Midlands (33 and 32 per cent), among pensioner households (38 per cent), among those in local authority housing (35 per cent) and among those in poorly insulated homes (69 per cent of families in homes with an EPC F-rating).
The sheer scale of energy bill increases mean that fuel stress will no longer be confined to the poorest households, says the Foundation, but low- and middle-income families will find it hardest to cope as they spend a far greater share of their family budgets on these essentials.
The report notes that the Government is rightly considering ways to mitigate rising energy bills, and should target support at lower income households.
The Foundation says that the most effective way to support lower-income families is through the benefits system, with a faster-than-currently-planned uprating of benefits in April (benefits are set to rise by 3.1 per cent).
Alternatively, an additional payment based on the Warm Homes Discount (WHD) could be pursued. However, the policy will require major surgery in order to make it for purpose. The reforms should include making the WHD:
Bigger, by increasing the £140 payment by at least £300;
Broader, by widening eligibility to all families in receipt of pension credit or working age benefits (8.5 million families in total) and making payments automatic;
Timelier, the extra support should be delivered via an additional bill discount this spring, following the normal winter round; and,
Taxpayer funded, by funding the payments through general taxation (at a cost of £2.5 billion) rather than through further increases in everyone else’s energy bills.
A new vastly improved WHD would cut the number of households living in fuel stress by around five percentage points – equivalent to over one million families.
The report adds that the Government may also want to take action to cut everyone else’s energy bills too.
This could be achieved by spreading the costs of energy firm failure over a number of years (reducing bills by up to £65) and temporarily transferring the social and environmental levies needed to future-proof Britain’s energy supply from bills to general taxation.
This would cut everyone’s energy bills by around £245 and would cut the number of families in ‘fuel stress’ by over seven percentage points – or 1.7 million families – but at a cost of £4.8 billion.
In combination, this dual approach of providing support to all energy bill payers, alongside targeted support for those most at risk of falling into ‘fuel stress’ would reduce energy bills by up to £545 a year – at a cost of around £7.3 billion – and help to avert a cost of living catastrophe this year. The rise in fuel stress would be reduced by two thirds, with 2.7 million fewer families in fuel stress.
Finally, while short term measures are clearly needed, the medium- and long-term solution to energy price shocks is reform of our energy market, better insulating our homes, and reducing our dependence on natural gas via an accelerated move to heat pumps, and the rollout of renewable and nuclear electricity.
Jonny Marshall, Senior Economist at the Resolution Foundation, said:“Rising gas prices are causing energy bills to soar, and will see the number of families suffering from ‘fuel stress’ to treble to more than six million households this summer.
“Fuel stress levels are particularly high among pensioner households, and those in poorly insulated homes – a stark reminder of the need to modernise Britain’s leaky housing stock and curb national dependency on gas for power and heating.
“The Government can take action by targeting support at lower income households via benefits or a bigger and broader version of the Warm Homes Discount. They should also temporarily transfer the cost of environmental levies onto general taxation, as well as spreading the cost of supplier failure over three years.
“While not cheap at £7.3 billion, this plan is affordable, and by cutting bills by up to £545 would help prevent the upcoming rise in energy bills turning into a cost of living catastrophe for millions of families.”
Proposals for a ground-breaking ‘net zero’ housing development, as part of the £1.3bn Granton Waterfront regeneration project in north west Edinburgh, were granted approval by city planners yesterday.
The Granton D1 project is the first Edinburgh Home Demonstrator (EHD) pilot which will see the construction of 75 net zero carbon homes and three retail units in Granton. The project is led by the City of Edinburgh Council with support from construction and academic partners and is part of the Council ambitions to deliver 20,000 affordable homes by 2027.
The project is being undertaken in partnership with CCG (Scotland) Ltd to test this new business model for building affordable, net zero homes. A large proportion of the construction will be carried out off site in a factory setting reducing the overall time it takes to build the homes. The homes will also include zero emissions heating. This will help to reduce their greenhouse gas emissions and support the city’s 2030 net zero target.
The pilot is also supported by a team from Napier University that will analyse the energy performance to validate and inform the net zero carbon strategy for future EHD projects. The EHD project aims to deliver 1,000 affordable net zero carbon homes across the six council areas in the City Region Deal.
Councillor Kate Campbell, Convener for the Housing, Homelessness and Fair Work Committee, said: “Making homes more sustainable will help us to meet our net zero targets, but the most important thing is that our tenants will benefit. With the cost of living rising sharply, making the running costs of homes more affordable will help tenants on low incomes, preventing fuel poverty.
“This pilot, and the learning we hope to take from it, is a really important step for us on our journey to making all of our housing stock more energy efficient, and better for tenants to live in. We have incredibly ambitious plans which form the bedrock of our housing strategy over the next ten years.
“There is a critical need for more affordable homes in Edinburgh and we are responding to that through our commitment to deliver 20,000 social and affordable homes by 2027.”
Councillor Mandy Watt, Vice Convener for the Housing, Homelessness and Fair Work Committee, said: “The Granton D1 development will provide affordable places to live for everyone with over 60% being for social rent.
“The development is part of the wider Granton Waterfront regeneration – which includes the creation of one of Europe’ s largest new coastal city parks.
“We hope to provide residents and visitors with the chance to reconnect with the city’s waterfront and taken advantage of the new leisure and outdoor experiences that will be on offer – altogether fostering an environment that will benefit everyone’s health, community spirit and wellbeing.”
Councillor Neil Gardiner, Convener for the Planning Committee, said: “This sustainable development is a great addition to our major regeneration of Granton Waterfront to create a coastal town with lots of green and open space.
“It was good to see the committee unanimously backing the project which will provide the area with much needed affordable net zero homes as well retail units providing businesses opportunities and employment locally.”
Calum Murray, CCG (Scotland) Director and Edinburgh Climate Commissioner, said: “The approval of Granton D1 is another important milestone for the City of Edinburgh Council and CCG.
“By working collaboratively alongside our partners, we are pioneering the delivery of affordable, net zero homes in Scotland and the Council is to be congratulated for taking these necessary first steps in delivery of our country’s net zero carbon ambitions.
“CCG is delighted to be leading the design and build of Granton D1 where we will provide a cutting-edge demonstration in the use of fabric first design and construction technology. We look forward to advancing works on-site in the very near future.”
Construction of Granton D1 is expected to begin in Spring 2022.
The wider proposals will bring over 3000 additional homes and create one of Europe’ s largest coastal city parks linking Granton Harbour to Cramond and Lauriston Castle, reconnecting the city with its waterfront and provide the opportunities for residents and visitors to enjoy spectacular views across the Forth while experiencing enhanced leisure
