The UK government set out a cost of living support package in response to rising household energy bills, doubling the loans made through energy suppliers to £400 per household and converting them into non-refundable payments1. The package also included an additional payment of £650 for households on means-tested benefits, £300 extra in the Winter Fuel Payment for pensioner households, and £150 for individuals in receipt of disability benefits, together worth £0.9 billion1. The local authority fund was increased to £1.5 billion, from the £1 billion Household Support Fund previously announced1.
The support came against a sharp rise in unit prices. Under the household price cap, gas prices in October 2021 were 3.86p per kWh and electricity 20.55p per kWh; in October 2022 these rose to 14.2p for gas and 49.6p for electricity1. Electricity prices have more than doubled and gas prices have increased by a factor of nearly four1. The costs of the household payments already agreed alone will exceed £10 billion in a single year, vastly exceeding government support for energy efficiency1.
Separately, the government announced the fourth round of the Energy Company Obligation (ECO4), targeted on energy efficiency investment in low-income households1. It is expected to spend an estimated £1 billion annually for four years and reduce fuel bills by a notional £220 million annually by 2026, before rebound1. Energy savings from the four-year programme will be approximately 3% of the total fuel bills for targeted households and 0.3% of all household energy1.
Other measures reported include removal of VAT on energy saving materials for five years, announced in the 2022 financial Spring Statement, and a £30 million Heat Pump Investment Accelerator Competition with energy advice services for consumers and SMEs under the energy security strategy1. An improved version of the Simple Energy Advice website has been migrated to the government's own website1.
"The loans via suppliers have been doubled to £400 per household and converted to non-refundable payments, with an additional payment of £650 for households on means-tested benefits, £300 extra in the Winter Fuel Payment for pensioner households and £150 for individuals in receipt of disability benefits, worth £0.9 billion."
| Payment | Amount | Group |
|---|---|---|
| Supplier payment | £400 | All households, non-refundable |
| Means-tested benefits | £650 | Households on means-tested benefits |
| Winter Fuel Payment addition | £300 | Pensioner households |
| Disability benefits | £150 | Individuals in receipt of disability benefits |
Why it matters for households
The payments were structured as income support rather than as reductions in energy use, so they cushion bills without changing how much gas and electricity a home consumes1. For a household on a low income, the combination of the £400 supplier payment and the £650 means-tested payment is a direct offset against a bill that, at October 2022 unit prices, had risen far faster than the payments themselves1. The £1.5 billion local authority fund is administered by councils, which is the route through which council and local authority energy grants and help for low-income households in England are delivered, with separate arrangements for Northern Ireland.
The energy efficiency side of the package is smaller in cash terms. ECO4 is aimed at low-income households and is expected to cut targeted households' fuel bills by around 3% over four years1. Households off the gas grid, which face different fuels and costs, are covered by support for off-gas-grid homes, and those with medical needs by support for vulnerable and medically dependent households. Eligibility routes through councils include ECO4 Flex local authority referral and ECO4 Flex local authority flexible eligibility, with further schemes listed under grants and schemes and household audiences.
What happens next
The October 2022 unit prices of 14.2p per kWh for gas and 49.6p per kWh for electricity were the figures in force under the price cap at the time of the analysis1. The briefing states that the measures announced focus on supporting incomes rather than longer term reductions in dependence on fossil fuels, and that improving home energy efficiency and supporting low-income households both need urgent attention1. No further dated steps beyond the ECO4 four-year programme and the five-year VAT removal are reported1.