In the wake of the spiralling cost of energy which has quadrupled in the past year1, regulator Ofgem has announced an increase to the energy price.
This will see almost a £700 increase in energy bills for the average household from April 1st. The government has moved to help offset the price increases through the targeted Energy Bills Rebate, which will mean that according to the government up to 28 million households will receive funding to reduce this cost2.
The government has stated that every domestic electricity customer will get £200 off their energy bills, with 80% of households receiving a £150 Council Tax rebate from April.
Energy suppliers will apply the discount to domestic electricity customers from October, with the Government meeting the costs. However, it is important to understand that the discount is not free. The discount will be automatically recovered from customers’ bills in equal £40 instalments over the next five years. This will begin from 2023, when global wholesale gas prices are expected to come down.
Additionally, there will be council tax rebates made available. Householders in England, who are in council tax bands A-D, will receive a £150 rebate. The rebate to bills will be made directly by local authorities from April. This will not need to be repaid. According to the government, this one-off payment will benefit around 80 per cent of all homes in England.
It had been argued that a cut in VAT on energy bills would be a viable tactic to help reduce costs, but the government claims that its rebate scheme and is more generous and more targeted towards lower-income families than a VAT cut on energy bills3.
There is concern that there will be many owners of property outside the A-D bands who are on fixed incomes, such as the retired, who will also suffer hardship. However, the government has set aside a discretionary fund of £144 million to support those who pay council tax for properties in Bands E-H. Whether this will be enough only time will tell.
Make sure you check whether you are eligible but while the council tax rebate is non repayable, remember that the £200 rebate will be repaid by customers in instalments from 2023.
Sources
1 – MacDonald, P. & Brown, S. (2022) UK electricity prices quadrupled in 2021. Available at: https://ember-climate.org/commentary/2022/01/14/uk-electricity-prices-fossil-gas/ (Accessed on 16th Feb 2022)
2 – HM Treasury (2022) Millions to receive £350 boost to help with rising energy costs. Available at: https://www.gov.uk/government/news/millions-to-receive-350-boost-to-help-with-rising-energy-costs (Accessed on 16th Feb 2022)
3 – Kumar, C., Caddick, D. & Stirling A. (2022) The Unequal Impact of the Energy Bill Crisis. Available at: https://neweconomics.org/2022/01/the-unequal-impact-of-the-energy-bill-crisis (Accessed 16th Feb 2022)
