Sunak unveils £9.1bn of rebates to cushion price cap hike

Rishi Sunak has unveiled a three-pronged plan, including £9.1 billion worth of rebates, to cushion the blow for households resulting from the sharp increase in the level of the energy price cap announced today (3 February).

Immediately following this morning’s announcement by Ofgem that the price cap on default tariffs will rise by £693 from £1,277 to £1,971 per annum, the chancellor of exchequer outlined the government’s package of measures to help customers negotiate the price shock.

This consists of three measures:

• Energy suppliers will give all domestic electricity customers a £200 rebate from October, with the government meeting the costs. This upfront discount will then be automatically recovered from bills in £40 instalments over the next five years, beginning in 2023, when the government expects global wholesale gas prices to come down.
• Households in England living in properties in council tax bands A to D will also receive a £150 rebate that will be made directly by local authorities from April and will not need to be repaid. This will cover around 80% of households. Councils will be provided with funding of £144 million to support vulnerable people and individuals on low incomes who do not qualify for the £150 rebate because they are exempt from council tax or live in properties within bands E to H.
• Eligibility for the Warm Homes Discount will be extended by a further one-third so that three million vulnerable households will now benefit, as well as the planned £10 uplift to £150 from October.

Sunak told the House of Commons that the one-off payments will be more targeted at low-income households and worth £1 billion more than the VAT cut on energy bills, which was proposed by the Labour party.

Prime minister Boris Johnson said: “We are delivering a new package of targeted support to help with the financial pressures felt by families right across the country, with additional help for those most in need.”

Responding for the opposition, shadow chancellor Rachel Reeves said that the government is “gambling” that wholesale costs will come down with its plan to recoup the £200 rebate for all households over future years.

Her colleague, shadow energy and climate change secretary Ed Miliband, said: “Labour would keep energy bills low, and we wouldn’t be landing costs with bill payers as they head into a spring of higher taxes and rising prices.”

The devolved governments in Scotland, Wales and Northern are expected to receive around £565 million of funding to match the council tax rebate for households in England, whilst the administration in Northern Ireland will receive £150 million next year to provide equivalent support to the electricity bill rebate.

The cost of living crisis and how utilities can respond to it will be a key part of the debate at Utility Week’s Customer Summit on 16 & 17 March. Find out more here.