The current system of policies supporting households with high energy bills is inadequate for an era of high energy bills. In this final, report with Public First, we present a new policy framework that should be in place by spring 2024 – to ensure warmer homes, fairer use of public money, and overall cheaper bills. It is part of a wider project commissioned and supported by Citizens Advice.
What should energy bill relief do? – 2024 and beyond
- The new policy framework for spring 2024 should be a social tariff – households spending an excessive proportion of their income on energy bills should receive targeted financial support to reduce those bills
- Who gets relief should be determined by the state, with no need for households’ applying themselves – and take the form of a discount in their bills, provided by energy suppliers.
- Our polling and focus-group evidence found that on average household bills of £3,000, people want a discount of around £900
- Eligibility for the social tariff should be based on household income and household energy consumption – to better reflect the complex relationship between energy use and need for support
- Central government will need to develop a new mechanism for identifying these households – based on HMRC’s income data and energy suppliers’ energy use data.
- Whilst these data do have their limitations, we conclude that even an imperfect new system would be better than the status quo.
- What form should the social tariff take? We argue for a formula-based lump sum payment, as the most progressive and fiscally efficient option
- It would be lump sum payment that varies according to a formula that takes into account household income and energy use.
- Whatever level of support is delivered via the social tariff, funding should come from general taxation. This is an exercise of social policy rather than energy policy and should be funded by the state.
We also looked at energy-efficiency measures, to prioritise fuel poverty over aggregate demand reduction, but keeping the latter a high priority of public policy in other areas
- Using the enhanced targeting system recommended in this report, the scale and ambition of the ECO regime should be significantly expanded.
- We do not argue for a fixed timetable for this ambition to be realised, but believe it can and should be delivered within the lifetime of a normal Parliament.
- Funding for this expanded ECO regime should continue to be raised via on-bill levies, consistent with the current approach.
- Policymakers should engage more with public opinion to make the cases for this.
Other parts of the project – including polling, workshops and focus group summaries – can be found on the project website: www.smf.co.uk/future-of-energy-bills