As you may be aware, new Government action to support households was announced by Prime Minister Liz Truss on 8th September, which replaced the price cap with a new Energy Price Guarantee. This was a huge fiscal intervention and will provide much support for many households across our area. The policy will operate as follows;
- The Energy Price Guarantee will ensure that a typical household pays an average £2,500 a year on their energy bill for the next 2 years, from the 1st October 2022.
- Under this scheme, the consumer saving will be based on usage. It is estimated that a typical household will save around £1,400 a year (based on current prices from October) and the average flat or apartment will save £700.
- £150 of this £1,000 a year saving will be delivered by temporarily suspending green levies.
- The government will make available an additional Discretionary Fund will be available for those households who are outside of the schemes. For example, households not on standard gas/electricity contracts and park homes.
To support businesses, on the 8th September, The Prime Minister also announced the introduction of the Energy Bill Relief Scheme. This will provide protections for all businesses, voluntary sector and public sector organisations which face excessively high energy bills over the winter period. I set out a summary of this scheme as follows;
- Businesses will receive support whether they are on existing fixed price contracts agreed on or after 1 April 2022, signing new fixed price contracts, variable or deemed tariffs or flexible purchase contracts.
- To administer support, the Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity.
- Suppliers will pass the reduction in the wholesale price through to their customers.
- The Energy Bill Relief Scheme will run initially for 6 months covering energy use from 1 October 2022 until 31 March 2023.
- The government will publish a review of the scheme after 3 months. This review will consider how best to offer further support to customers who are the most vulnerable to energy price increases. These are likely to be those who are least able to adjust, for example by reducing energy usage or increasing energy efficiency.
In addition to all of the above, the government have taken a number of steps earlier this year to tackle the cost-of-living challenge. Just as a recap, I reiterate these measures below.
You may recall that back in spring the Government took steps to help the lowest-income households with the cost of living before the April price cap rise. This help was applied by a reduction in the Universal Credit taper rate; an increasing of the National Living Wage; fuel duty was frozen for the twelfth consecutive year; and the Government launched a £500 million Household Support Fund.
Following Ofgem raising the price cap in April, the Government took further action by putting in place a three-part support package to help both lower and middle-income earners. The help announced at the time is outlined below and many households and individuals will be starting to benefit from these payments.
- An Energy Bill Discount. This provided £400 off energy bills for households from this October. This automatic, non-repayable discount will be applied in six instalments between October 2022 and March 2023.
- A Cost of Living Payment. This is a payment of £650 this year for households on means tested benefits, including Universal Credit, Pension Credit and Tax Credit. This will be made automatically in two instalments, one during this summer and another in the autumn.
- A Disability Cost of Living Payment. This is a one-off £150 payment, made this month of September to help with extra costs for individuals on disability benefits. This payment is in addition to the £650 ‘Cost of Living Payment’ for disabled people who also receive means tested benefits.
- A Pensioner Cost of Living Payment. This is an extra one-off £300 payment for pensions which will be paid as an automatic top-up to the Winter Fuel Payment.
In recognition of the unprecedented circumstances pushing up fuel prices, the Government announced in the Spring Statement a cut in fuel duty by five pence for a full year across all fuel duty rates. The decision to freeze fuel duty for the twelve consecutive years prior to this cut had already saved the average driver over £1,900 compared to the pre-2010 escalator.
Recognising the impact inflation has upon salaries, the Government announced pay rises for over 2.5 million public sector workers. The Government has also said that it accepted the recommendations of NHS, police and teacher pay review bodies in full. Across the public sector, these are the highest uplifts in nearly 20 years.
High energy prices, exacerbated by events in Ukraine, have also put upward pressure on food prices. In response, the government announced an additional £500 million to help provide targeted cost-of-living support for households most in need.
To put all of todays and previous announcements made on the 8th. Sept in context;
The tax cuts and expected savings through the Energy Price Guarantee means that in the year from April:
▪️ A typical person in a semi-detached property will save £1,150 on the household's energy bills - and if they are earning £30,000 almost an additional £400 on tax. This is around £1,550 in total.
▪️ A typical family moving into a semi-detached property will save £2,500 on stamp duty and £1,150 on energy bills – and if they have a combined income of £50,000 around an additional £560 on tax. This is around £4,200 in total.
▪️A typical family moving into a semi-detached property will save £2,500 on stamp duty and £1,150 on energy bills –and if one worker earns £50,000, almost an additional £850 on tax. In total around £4,500.
Over past months, there has been some key strategy directions issued by the Government as well. I appreciate the below will not have an immediate impact, but it does illustrate a strong and vital direction of providing more stability and resilience within the nations armour.
The Government’s Food Strategy, published in June, sets out the importance of maintaining and boosting domestic food security, something which I am very keen to see. This will help strengthen the resilience of UK supply chains and increase domestic production to help protect against future economic shocks. The UK has a highly resilient food chain owing to its diverse sources of supply, including strong domestic production as well as imports through stable trade routes. The UK produces enough food to account for 60 per cent of demand, 74 per cent of which can be grown or reared in the UK for all or part of the year.
The Government’s Energy Security Strategy, published in April, sets out plans to accelerate the deployment of wind, new nuclear, solar and hydrogen, while supporting the production of domestic oil and gas in the nearer term.
Our new Prime Minister has signalled her intent to continue with these plans. The government over past weeks have stated they will increase supply by;
- launching a new oil and gas licensing round, expected to lead to over 100 new licences;
- lift the moratorium on UK shale gas production, which could get new gas flowing in as soon as six months;
- continue progressing up to 24GW of nuclear by 2050;
- undertaking fundamental reforms to the structure and regulation of energy market through recommendations from a new review of the UK energy regulation; and
- launching a review to ensure the UK is meeting its net zero 2050 target in an economically-efficient way.
I hope you will agree that the measures the government are putting in place are comprehensive and aim to touch as many individuals, households and businesses are possible.
The Chancellor’s Growth Plan means that residents across Keighley and Ilkley will have more money in their pockets to help deal with the current cost-of-living challenge. The Plan sets out a transformational shift that enables businesses across our area to unlock their potential to go on, grow and thrive. A low tax economy is essential for creating growth, attracting investment and making our business sector more competitive, all of which gives businesses the best chance of maintaining and creating jobs across our area.
The Chancellors plan puts economic growth and cost-of-living support at its heart.
