Ministers are set to fast-track a project to target energy bill support at lower-income households in response to rising prices driven by the war in the Middle East, The i Paper can reveal.
Houses in receipt of means-tested benefits – such as pension credit, universal credit or tax credits – or those who have exceptionally high energy costs relative to their income, would be identified for support, with new analysis predicting bills could reach up to £2,500 a year in July.
The move could spare the Government from having to offer the kind of expensive, blanket support handed out after Russia’s invasion of Ukraine in 2022, which cost around £40bn over two years.
The price cap — set by Ofgem and reviewed every three months — limits what energy suppliers can charge per unit. It will fall to £1,641 for a typical household from 1 April, but the next cap, covering the months from July to September, will be calculated on current wholesale prices, which have surged since the conflict began.
New analysis from energy consultancy Auxilione, shared with The i Paper, projects the price cap to climb by as much as 52 per cent to between £2,000 and £2,500 this summer if wholesale prices do not fall.
Fuel poverty charities said vulnerable households are already taking desperate measures to ration energy use. Matt Copeland, head of policy at National Energy Action, said: “There are families with young children who are making unbelievably difficult choices about how they spend their money on essentials, children who are being asked to share beds, children who are being asked to live with grandparents because their homes are warmer.
“All of these things are already happening, and an increase in prices will only serve to make it worse for those people and bring others into that situation.”
Benefits and energy use to determine who gets help
The project would see ministers use data on people’s energy use, tax records and benefits to identify who qualifies for help.
A pilot was announced in January and due to launch in May, but The i Paper understands the Department for Science, Innovation and Technology (DSIT) is now looking at whether that timeline can be accelerated amid growing concern over rising energy prices.
In a recent update on the project, DSIT said: “Information about household circumstances — earnings, benefits, energy usage — is held across different parts of the public sector. Bringing this information together could help build a clearer picture of which households are struggling and may be entitled to support.
“This project will explore whether securely connecting these different data sources could make it easier to identify households in need, to ensure support reaches the people it’s designed for faster.”
One scheme that could form a model for more targeted payment is the Warm Homes Discount scheme, first launched in 2011, which automatically gives a £150 discount on energy bills for those claiming certain benefits, such as universal credit or pension credit.
The i Paper understands that the Government is still considering what information – such as household income or a home’s energy efficiency – could be considered alongside benefit data to better target support.
It would involve looking at data from three government departments – the Department for Energy Security and Net Zero (DESNZ), the Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC).
Targeted support could save UK billions
The Institute for Fiscal Studies (IFS) has warned that a universal package on the scale of 2022 is unlikely to be affordable. The Government faces “much higher borrowing costs” than it did three years ago, the think tank said, adding these “could grow further if interest rates go up, making it harder to fund an expensive support package.”
Analysis by the IFS found that more targeted support in 2022 — combining data on household income and energy usage — could have cut the cost of the scheme by 18 per cent, a saving of around £6bn.
Peter Levell, deputy research director at the IFS, welcomed the initiative. He told The i Paper: “When you spend tens of billions on [energy support], a small outlay on trying to put together the mechanism for delivering in a way that’s going to most effectively target it, that’s probably worth it.”
In a press conference on Monday, the Prime Minister announced £53m of support for low-income households using heating oil, which have been hardest hit by price rises since the conflict began. He indicated the Government could go further, adding: “Whatever the challenges that lie ahead, this government will always support working people.”
Energy Secretary Ed Miliband also declined to rule out wider support over the weekend, telling the BBC’s Sunday with Laura Kuenssberg programme that the Government was going to “stand by people in this crisis” and was “preparing for all eventualities” for how energy costs could surge.
Simon Francis, of the End Fuel Poverty Coalition, said the support announced on Monday does not go “far enough” and called for an expansion of the warm homes discount, suggesting it be paid for by tax rises rather than passing the cost on to all bill payers.
He added: “The announcement for the July price cap will be at the end of May. The Government needs to make sure that by that point, it has a plan in place as to how it’s going to support households should these predictions come to pass.”
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