Government must avoid ‘cliff edge’ after cutting energy support package
The Government must ease support for households to prevent them facing a sudden uptick in their energy bills, warned the chair of a leading Westminster body.
Darren Jones, chair of the Business, Energy and Industrial Strategy (BEIS) Committee, explained that the group had been calling for the targeting of public funds for people need it the most for a long time.
“Ministers should have been working on this months ago,” he said.
However, this support needed to be gradually cut back rather than simply dropped in April, and that it should be accompanied by long-term measures to keep bills down such as making homes more energy efficient.
Jones said: “Any end to support for all bill payers should be tapered off, instead of facing a cliff edge. Government must also bring forward a national home insulation programme urgently, to help everyone reduce their energy bills.
He revealed the committee, which published its review of the energy market in July, would scrutinise any changes to the scheme “in due course.”
Government rolls back support for households
The chair’s comments follow new Chancellor Jeremy Hunt rolling back the two-year energy support package to just six months.
This package – named the Energy Price Guarantee – subsidises energy bills so the average household would pay £2,500 from October rather than £3,549 per year established in the price cap.
It was set to last two years, amid warnings the energy crisis will endure until winter 2023.
However, Hunt has revealed Downing Street will review potential targeted measures to help households while reducing the cost of the package – which Cornwall Insight has calculated at £72-140bn.
Adam Bell, head of policy at insight specialists Stonehaven, told City PM gave a sense of the “grown ups being back in charge.”
He said; “An untargeted measure was always likely to be unsustainable even in the medium term. Government has now bought itself some time to rethink the scheme and better target it.”
Bell suggested the scheme could be targeted more efficiently through using the tax system to point at income levels.
However, he said such changes would “challenging to implement” by April.
Energy groups raise concerns over support cuts
Energy bosses and industry groups have raised concerns over today’s shortening of the support package.
Nigel Pocklington, chief executive of Good Energy, warned that the latest change in policy threatened stability, making it harder for customers and businesses to plan ahead in difficult circumstances.
He said: “What we’re seeing is the fallout from a rushed implementation of an open-ended policy from a political party in disarray. This turnaround will cause yet more uncertainty for vulnerable household and business customers.
The energy boss also argued that any push to “incentivise energy efficiency” should not be at the expense of customers, leaving them “at the mercy of market prices. “
Chris Venables, head of politics at Green Alliance, feared any new slimmer packages could end up being “a sticking plaster” solution that leaves millions Brits exposed.
He said: “Any changes to the government’s energy bills package must ensure people can afford to stay warm this winter. But we can’t keep applying a sticking plaster to the problem of higher energy costs. Plugging the hole in the public finances and bringing down people’s bills for good can only be achieved with a programme to insulate homes and expand clean cheap renewable energy.
“What is needed now is certainty. Urgent clarity from the treasury on what support customers can expect when, alongside campaign to reduce energy demand. Not only through public information, or price incentives, but physical insulation of homes.”
Following today’s reversal, energy forecaster Auxilione has revealed its latest prediction for the price cap in April.
It predicts the cap will spike to £5,000 per year in April for the average household, which will kick in fgor all households without further support packages.
Auxilione said: “This will of course be a huge potential concern for households in a U-turn that will no doubt be very unwelcome on top of all the other factors being faced as a result of the economic decisions being made.”