On 26 May, the Government announced a £15 billion cost of living support package, which will be funded in part by a new ‘windfall’ tax on the profits of oil and gas companies operating in the UK. As part of the package, every UK household with an energy account will receive a £400 discount in the Autumn to help with the cost of energy bills. In addition to this, low-income households in receipt of certain means-tested benefits will receive a £700 cost-of-living payment split into two instalments; one in July and one in the Autumn. All pensioner households will also receive a £300 cost of living payment this Autumn and around 6 million people who receive certain disability benefits will receive a £150 payment.
While these payments will go some way in alleviating immediate hardship, Ofgem predict that the energy price cap will rise by almost £900 this October (from £1971 to an estimated £2800), on top of the £693 increase for 22 million customers in April. Therefore, further support measures will be needed to mitigate the impact of rising fuel costs on the most vulnerable households to prevent them falling into poverty and destitution.
Moreover, operators of heat networks and heat network customers are being disproportionately affected by wholesale gas price increases as customers are not protected by the Energy Price Cap or the Supplier of Last Resort mechanism. Local Authority operators are facing significant additional budget pressure and customers are seeing price increases of 400 per cent, and sometimes up to 1000 per cent. Councils will either need to pass the additional cost on the householder, which are often social housing tenants, or absorb the additional cost themselves which quickly becomes financially unviable.
We therefore support the industry’s ask of government to fund a local authority administered hardship fund similar to the Household Support Fund for heat network customers on ‘cost recovery’ schemes, and targeted grant funding to prop up Energy Supply Companies (ESCos) operating ‘price matching’ schemes. In the medium term, we would like Government to bring forward the commitments to build and support the heat network market, and deliver better consumer protection, as set out in Government Heat and Building Strategy, before the market is irreparably damaged and consumers lose trust in the technology, which will be vital in decarbonising heat.
We support the Government’s ambition outlined in the Energy Security Strategy to protect consumers from unfair pricing by enabling an extension of the price cap beyond 2023. However, fuel poverty is increasing now, and energy price hikes will further hit households in the months ahead. We therefore need urgent efforts to decarbonise energy and insulate homes, focussing on households in fuel poverty to make households more resilient to rising energy costs, particularly in the winter months. Achieving the Government’s ambition to retrofit 3.1 million homes to Energy Performance Certificate (EPC) rating C by 2030 could save up to £770 million a year in household energy bills by 2030. However, meeting this ambition would require retrofitting 900 homes a day.
The Government must therefore provide the appropriate amount of investment to kick-start an energy revolution in social housing and enable councils to deliver deep energy retrofit and roll out innovative renewable technology to upgrade housing stock to the benefit of residents. One solution would be to bring forward the £3.8 billion Social Housing Decarbonisation Fund to help the rollout of an ambitious national retrofit programme across all tenures. This would enable councils to have a larger, more meaningful impact to meet net zero targets at a faster pace and help tackle fuel poverty.