June 20, 2024

The UK’s cost of keeping energy bills down for homes and businesses over the winter months added up to almost £40bn, the first official government total shows.

The Treasury pegged the final cost of keeping a lid on the UK’s energy bills at £39.3bn between October 2022 and March 2023 after Russia’s invasion of Ukraine propelled energy market prices to record levels.

The unprecedented jump in wholesale energy costs forced the government to make its biggest ever intervention on energy bills at a cost to the exchequer of about £2,500 every second since October, it said.

Home energy bills had been on course to more than triple in the space of a year to reach an annual average of £4,300 in the first quarter. In response, the government spent £21bn to cap the average dual fuel bill at £2,500 through its energy price guarantee. It spent a further £12bn to give every household a £400 rebate in order to reduce costs further.

The National Audit Office (NAO) criticised the schemes for offering support to millions of households that were still able to afford their energy bills. The NAO had forecast that the government’s support plans would cost £69bn, but falling market prices have reduced the cost of the schemes.

The Treasury also spent £5.5bn over the winter through its energy bill relief scheme, which provided a discount to businesses and public sector organisations such as schools and hospitals between October and March.

The government has sharply curtailed its support as energy market prices have tumbled from their highs last year, but experts have warned that market prices could remain well above pre-pandemic levels until the end of the decade, keeping 6.5m households in fuel poverty.

Household bills are now protected by a price cap set by the energy regulator, Ofgem, equivalent to £2,074 for the typical household’s annual gas and electricity consumption from July, which is still double the rate before energy market prices began to climb.

Ministers have replaced the government’s energy price guarantee, and its one-off £400 grants, with a series of payments targeted at the most vulnerable that include a £900 payment for those on means-tested benefits, £300 for pensioners and an extra £150 for disabled people.

However, about 1.7m households in severe fuel poverty are expected to miss out on the extra help because they are not registered to receive certain benefits, according to researchers at the University of York. These households are estimated to include 688,000 fuel-poor families with children.

The business bills relief scheme has been replaced with a far less generous arrangement that has left thousands of small businesses fearing they may go bust before next winter.

The government’s other energy support schemes, including support for “off grid” households and businesses that use alternative fuels, came to almost £1bn over the last winter, according to the government’s tally.

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Keeping UK energy bills down over winter cost almost £40bn