The Chancellor’s cost of living support package

Yesterday the Chancellor announced a cost of living support package. Here’s what you need to know:

The bare facts 

Last year the price cap was set at £1,138. From October, this is expected to increase to about £2,800, an increase of almost £1,700 in just over a year.

What has previously been announced?

• A £150 council tax energy rebate from April to all households in England, Scotland and Wales in bands A to D. Households should receive this automatically if they pay Council Tax and pay by Direct Debit. Otherwise, households will have to apply to their local authority. 
• A discretionary fund for councils aimed at those on low incomes who don’t qualify for help, including those that are not currently paying Council Tax. This discretionary scheme is currently being developed by South Hams District Council.
• Warm Home Discount – increased by £10 to £150. Overall more households will be eligible.

What is the extra support being offered? 

(for more information, watch Martin Lewis’s Q&A with Rishi Sunak)

• A non-repayable £400 grant for all households, spread over 6 months from October. Prepayment customers will receive vouchers or have credits added to the meter directly. This will be funded by a ‘Windfall tax’ and replaces the £200 ‘loan’ previously announced. 
• A one-off payment of £650 for those on certain means-tested benefits (those on tax credits may be processed differently). Two payments, one in July and one in the autumn, paid into the same account that benefits are paid. Tax-free, with no impact on other benefits.
• A one-off £300 top-up for pensioners in receipt of winter fuel payments. This will be paid in Nov-Dec and will in most cases be paid by Direct Debit. Tax-free, with no impact on other benefits.
• A one-off £150 payment for those on certain non-means tested disability benefits, who either receive this currently or began an eventually successful claim on 25th May. Please note, many people in receipt of disability benefits will lose out on Warm Home Discount this year and so this simply replaces that sum.
• An extra £500 million to be paid into the “Household Support Fund“. Other support is also provided by South Hams District Council for households struggling financially.

What will this mean for typical households?

(All figures are average and do not take into account further price cap increases from Jan 23)

• Working age household not in receipt of any means-tested benefit, no disability – Support of £400, but energy will cost an extra £1,300 from October 22.
• Pensioner household not in receipt of any means-tested benefit, no disability – Support of £400 + £300, but energy will cost an extra £1,000 from October 22.
• Working age household with means-tested benefit, but no disabilities – Support of £400 + £650 = £1050, but energy will still cost an extra £650 from October 22.
• Pensioner households receiving pension credits and with a disability – Support of £400 + £650 + £300 + £150 = £1,500 – but energy will still cost an extra £200 from October 22.

The challenges

• No one in the next year or so will have all their energy price increases covered and in most cases will fall far short – unless people reduce their energy use significantly.  Some may see this as an incentive to do so, and our energy team can show clients how they can make significant savings.
• Energy is just one element of the cost of living crisis – inflation is currently at 9% and rising, with particular impacts on essentials such as food and motoring fuel.
• A lot of the extra government payments will be paid into bank accounts, and are likely to be absorbed by other rising household costs, rather than towards energy.
• The future is unknown and how much ongoing support the government will provide beyond March 23.  This depends to a great extent on the war in Ukraine, and its wider impact on energy supplies from Russia and how that changes the wholesale prices paid by energy suppliers.

Anyone struggling with their energy bills can contact Citizens Advice South Hams and we will make sure you’re getting all the support you’re entitled to and offer advice on reducing your energy use.