Exclusive: Government plans to cut debt relief for energy bills

  • Debt assistance for heating and energy bills under Warm Home Discount could be cut under new plans
  • Cap on debt assistance would be set 30 percent lower than most recent levels
  • Funding for programme is being maintained, but with spending shifted towards advice and energy efficiency measures

By Chaminda Jayanetti

The government is planning to cut the amount of money spent each year reducing the debts of the poorest energy customers, potentially taking £4.5m away from heavily indebted households.

The cut is the main proposed change to the Warm Home Discount (WHD) scheme, under which large energy firms provide rebates on bills to pensioners and other customers on low incomes.

The government is not looking to cut the total amount of money energy firms spend on the scheme, which stood at £320m in 2015/16 and is targeted to rise with inflation each year until 2021. Instead it is looking to change how some of that money is spent.

Most WHD funding goes on £140 rebates to households on low incomes, which the government is not proposing to change in 2016/17.

But around £20m each year goes on a variety of “industry initiatives” that provide other forms of support to poorer households. Participating energy firms can choose how this money is spent.

Since the WHD scheme launched in 2011, most of this money has been spent on debt relief for energy bills, either reducing or cancelling the debts of poorer customers in arrears.

But the government is concerned that while this eats up the budget, it reaches relatively few people. In 2014/15, the most recent year for which figures have been published, debt relief accounted for 72 percent of spending, but just a fifth of the customers who were helped under the various industry initiatives.

The government now wants to limit spending on debt relief to half the £20m industry initiatives budget – representing a fall of 30 percent from the 2014/15 share of the budget.

In 2014/15 the various industry initiatives served 127,269 customers. The fifth of them who received debt relief amounts to roughly 27,000 people, served by 72 percent of the budget. Given that this spending will be capped 30 percent below this rate in 2016/17, potentially 8,000 fewer people (30 percent of 27,000) would have their energy debts reduced or cancelled if the government’s proposal goes ahead.

The cut in spending on debt assistance from the 2014/15 level would be nearly £4.5m.

The consultation document outlining the government’s proposals states: “Government wants to incentivise a more diverse range of activities under the Industry Initiatives element of the scheme… We suggest that a cap on debt assistance would increase the number of customers able to benefit from Industry Initiatives and would widen the type of help customers could access.”

Other industry initiatives are cheaper to deliver, and so can reach more people – energy efficiency measures, micro-generation, advice on energy efficiency, even helping customers with benefit claims.

However, it is questionable whether they would all have the same impact on an individual customer as forgiving onerous debt.

As for the energy bill rebates that make up the bulk of the WHD scheme, the government is not proposing any major changes in 2016/17.

However, in future years it is hoping to guarantee rebates for more households, and target these rebates to where they are most needed by factoring in data on the size of people’s homes – the larger the house, the greater the heating need, and thus the greater the risk of fuel poverty.

In addition, the government hopes to encourage energy firms to invest in ways to identify very poor households that do not claim benefits, which might currently fall under the radar of the WHD programme.

The government launched the consultation on the 2016/17 scheme last Friday, with responses due by 6th May. The pdf consultation document can be found by clicking here.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s