NAO warns of fraud and error risk on business bills support

The government faces a greater risk of overpayments in its business energy support schemes than those set up to help households, Whitehall’s spending watchdog has concluded.

The National Audit Office (NAO) has assessed the operation of the various energy support schemes set up by the department for business, energy and industrial strategy (BEIS) to limit the impact of spiralling energy bills on homes and businesses.

The NAO’s scrutiny includes the Energy Price Guarantee, which has limited household energy bills to an average £2,500 per annum and the Energy Bill Relief Scheme, which has provided an equivalent level of support for non-domestic customers during the current winter.

In a report released on Tuesday (7 February), the NAO says the government currently estimates the schemes’ total costs are £69 billion, which is around half the £139 billion originally estimated due to cuts in the level of support available from this April, falling wholesale gas costs and a drop in demand. The NAO acknowledges that estimates of the schemes’ costs are “inherently uncertain”.

It pays tribute to BEIS for the rapid rollout of its energy support schemes, which ensured help was available by the time temperatures began to drop this winter.

This was achieved by shortening timetables for approving new policies and deprioritising other activities.

The report says BEIS accepted that implementing schemes at speed and offering almost universal eligibility brought “substantial risks to value for money” by providing support for homes and businesses which did “not necessarily need it”, otherwise known as ‘deadweight’ costs.

The scheme’s rapid rollout also meant BEIS’s assessment of the potential for fraud and error was “not as detailed as would normally be the case for such levels of expenditure”.

The report says the risk of overpayment to business is enhanced because it is more straightforward for BEIS to verify that the payments to suppliers on the domestic schemes are accurate because most households are charged a similar tariff and Ofgem’s price cap gives a guide to the amount suppliers’ costs should have been.

However, it says that none of these factors apply in the non-domestic sector and around three-times more suppliers exist.

The NAO says BEIS is collecting detailed information from non-domestic suppliers to support their payment claims, which it plans to scrutinise retrospectively for errors and the sums of money that must be recovered.

“When considering how to increase targeting, BEIS will need a rigorous assessment of the likely losses to fraud and error, alongside the likely improvements in value for money from reduced deadweight.”

Gareth Davies, the head of the NAO, said: “Similar to the government’s assistance during Covid, the energy bills support schemes were introduced universally, and at speed, to reduce the impact of soaring energy costs for people and businesses.

“This approach led to compromises – introducing these interventions at speed meant that BEIS has less time to consider fraud and error risks; and their universal nature meant that a significant number of households received financial support they did not need.

“As the government seeks to target future assistance, it must be mindful of the risk of introducing complexity which could aid fraudsters. The NAO will continue to monitor these schemes to understand their impact, particularly the costs and benefits of universal versus targeted support.”