Chancellor unveils up to £350 in support per household to help mitigate rocketing energy prices
Households are to get up to £350 in cash to help with their energy bills this year, Chancellor Rishi Sunak has announced. The move comes after widespread pressure from campaigners, including MoneySavingExpert.com founder Martin Lewis, for the Government to step in to help households during the cost of living crisis. Here's what you need to know.
Over £9 billion in state-backed loans will be made available to households in England, Scotland and Wales, it's been revealed today – providing up to £350 per household to help soften the blow of rocketing energy prices. This follows regulator Ofgem's earlier announcement today of a 54% increase to the energy price cap (about a £700/year hike to a typical bill), due to record wholesale energy prices (those providers pay).
The new measures announced today include:
- A £200 rebate loan in October to all households. You'll get an automatic £200 discount on your bills, regardless of what tariff you're on. See more info on how the new energy bill loan really works in Martin's video explainer.
- A £150 council tax rebate in April to all households in England in council tax bands A to D. The Chancellor has also announced a total of £565 million in funding for the Scottish, Welsh and Northern Irish Governments to provide similar funding for households. See more info in our Households to get £150 off council tax bills MSE News story.
- About a £144 million discretionary fund for councils aimed at those on low incomes. This is to help those on low incomes who don't qualify for the £150 support above because, for example, they're exempt from council tax.
The help is flat-rate, so you get the same regardless of your usage or income (providing you qualify for the council tax rebate under your council tax band) – that means the lower your energy usage, the bigger the benefit, as the more energy you use, the higher your bills are.
Today's measures are aimed at mitigating the current high costs of energy, so while this support will help many struggling with their bills, it won't cover the full cost of the energy price hikes, following the £700/year standard-tariff rise also announced today. See our Struggling with energy bills? guide if you find yourself unable to keep up.
It will also likely increase energy bills further over the coming years, as the £200 help in October will be paid for by reclaiming about £40/year from all households' energy bills over the next five years from April 2023 (the Chancellor said the council tax rebate won't need to be paid back).
Martin's immediate thoughts on today's cost of living crisis news, including the energy bill and council tax rebates
How will the £200 rebate loan on energy bills work?
The Government has yet to confirm the full details on how the energy bill rebate loan will work, but it has said all households, regardless of what tariff they're on, will get a £200 discount on their energy bills – providing help to about 28 million households.
While we don't know exactly how this will be paid yet, the Government did tell us that it's unlikely to be a one-off, lump-sum payment, and more likely to be paid in instalments. However, this is not confirmed yet, and the details will be worked out at a later date.
You'll also get the full £200 if you're in an electricity-only household – as the support is for household energy bills, regardless of how you heat your home.
If you're on prepay, you should get the rebate automatically if you have smart meters, while those without smart meters will get a voucher or cheque, similar to how the warm home discount is paid for those on prepay.
The £200 discount will only be available for those in England, Wales and Scotland, though the Government has said Northern Ireland will receive funding to deliver the scheme separately.
As the £200 is a loan, the costs of providing it will be recovered automatically from everyone's household bills – likely as an increase to standing charges, according to the Government – in equal £40 instalments over the next five years, starting from April 2023. It is hoped that global wholesale gas prices will have fallen by then, but this will mean future bills will be higher than they would have been as a result.
How will the £150 rebate on council tax bills work?
In most cases you DO NOT have to apply for the discount as your local authority will automatically recognise if you qualify. But how you pay your council tax may affect how quickly you receive the rebate.
For households that pay their council tax using a direct debit, your local authority will transfer the payment into your bank account using details already held on its system. The £150 payment is a one-off and non-repayable.
For those who don't pay their council tax by direct debit, local authorities have been instructed to ask bill-payers for their bank account details so they can receive the £150 support.
If your property isn't in bands A to D, you may be eligible for support from the separate £144 million pot going to councils. Examples of households that may qualify for this additional support include those where everyone's 'disregarded' for council tax, such as all-student households, and low-income households where the property is in bands E to H.
If you won't get the discount automatically, you'll need to speak to your local authority to check if you're eligible for the separate support, though it will be better to do this closer to April once councils have had a chance to work out a mechanism for distributing the money allocated.
Devolved governments in Scotland, Wales and Northern Ireland are also expected to receive about £565 million to offer similar funding to households.
For more information, see our Households to get £150 off council tax bills MSE News story.
Warm Home Discount scheme to be expanded and funding raised to £150
The Government has also announced today that it will go ahead with previously proposed plans to expand eligibility for the warm home discount, and to increase the payment from £140 to £150 from October.
This will see an extra 780,000 homes qualify for the scheme – which provides help to vulnerable customers to pay for their energy each winter – meaning that about three million households in total will be able to benefit from the scheme next winter.
For more info, see Warm home discount help.