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Spring Budget 2023: UK Gov commits to energy bill support

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The UK Government has officially unveiled its Spring Budget, with a whole host of spending commitments for the electrical industry included. 

In a series of articles on Electrical Review, we plan to share both the industry’s reaction as well as the top announcements from the Spring Budget, which was unveiled on March 15. 

In this part one, we will detail the UK Government’s renewed commitment to offering energy bill support for UK households. However, there’s more to come, the first batch of articles will be available today (March 17), but you’ll be able to get the final articles next week. 

Renewed support for energy bills

Arguably the biggest impact on consumers of electricity in the UK will be the renewed support the UK Government is planning to give for energy bills. While Chancellor Jeremy Hunt had initially announced that the UK Government would reduce its support, hours before the Spring Budget was formally announced, the Treasury confirmed that it would be continuing the current level of support. 

That means households across the UK would continue to have their energy bills capped, with the average household expected to pay no more than £2,500 per year. This was initially expected to increase to £3,000 a year, but industry lobbying forced the Government into a u-turn. 

The reasoning behind the Government’s change of heart comes thanks to a reduction in the wholesale cost of electricity, which has been declining since the peaks we saw last year. That has meant that the policy has cost the UK Government less than initially expected, allowing it to have more headroom to expand the current level of support. 

However, the UK Government did also confirm that all support would cease at the end of June, although Ofgem’s price cap should have dropped to below the Government’s level of support by then. Cornwall Insight has estimated that Ofgem will set the cap at around £2,200 for the July-September period, increasing slightly in the October-December period to £2,241. 

In addition to the UK Government’s extension for the current level of energy bill support, Jeremy Hunt also confirmed that community swimming pools up and down the country would benefit from additional support. Given the high cost of keeping swimming pools heated, there have been worries in some communities across the UK that councils would be forced to close their swimming pools due to spiralling energy bills. Now the UK Government is coming to the rescue. 

The support for leisure centres comes in the form of a £63 million funding pot, which will not only go towards heating bills but also to help those leisure centres improve their energy efficiency – meaning their future energy bills are lower. 

Businesses will also benefit from a reduction to their bills, as long as they continue to take part in the Climate Change Agreement scheme, which has been extended for a further two years. 

The scheme offers businesses a discount on the Climate Change Levy, a tax added to electricity and fuel bills, in exchange for commitments to reduce their energy use and carbon dioxide emissions. 

However, the UK Government did not announce any amendments to the upcoming planned changes to the Energy Bill Discount Scheme, which is offered to non-domestic energy users. This could mean many businesses across the UK see their energy bills begin to tick back up. 

Industry reaction

Robert Buckley, Head of Relationship Development at Cornwall Insight, commented, “Once again, a UK budget has seen some significant energy policy announcements that will stir up conversation and opinion across the country. It also shows how reining in energy prices is seen as key to restraining inflation.

“The pre-budget announcement to maintain the Energy Price Guarantee at £2,500 had already brought much-needed clarity to energy suppliers and no doubt relief for many households.2 The additional announcement that charges for prepayment meters will be aligned with comparable direct debit charges from April 1, 2024, will further help, and we wait to see more detail on the implementation.  

“Many businesses, like households, are struggling with high energy bills, and today’s statement that Climate Change Agreements will be extended by two more years from April 1, 2025, and that swimming pools and community groups will be getting access to a relief pot will be welcome news to those eligible. However, many will be left disappointed that there were no adjustments to the less supportive Energy Bill Discount Scheme due to take effect from the start of next month. While households have general support for another three months, the expectation is clear that the vast majority of users will once again see their energy bills driven by the market from the summer.”

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