Warm Home Discount scheme
What is the Warm Home Discount and how do I get it?
In the current global climate of inflation and high energy costs, the cost of living crisis in the UK continues to rise. The typical bill at present is around £2,000 a year, which is already a £700 rise since April and is expected to rise again in October with an 81% price cap rise to £3,582 a year. The energy industry analysts predict UK bills will top £4,266 a year from January 2023. In light of this, the government has introduced several new schemes to assist with paying bills.
Why are energy costs so high?
Inflation and the rise of living costs have been triggered by the reopening of the world economy post-lockdown and then by Russia’s invasion of Ukraine, which saw the rise in the wholesale of gas and electricity due to an increase in demand. Energy companies have passed these costs onto consumers, which has in turn caused household energy bills to increase by an unprecedented amount.
The Bank of England has announced inflation of more than 9% (a 40-year high), which in turn causes companies to increase their prices as we enter a recession and borrowing costs rise. Whilst energy firms like Shell and British Gas owner Centrica have reported huge profit margins due to the rise in energy prices, households across the UK are expected to be in deeper fuel poverty this winter.
The soaring wholesale prices of electricity and gas has also resulted in around 30 suppliers collapsing during the crisis, which meant that around 2.4 million customers were automatically moved to a rival company. These customers have had to pay approximately £30 extra a month for the duration of their original contract because they were moved onto a more expensive tariff.
This has led to concerns as to how families will manage their household and finances whilst heating their homes this winter. This situation will likely lead to serious ill-health especially for those most vulnerable to the cold.
What is the Warm Home Discount Scheme and how will it help?
The Warm Home Discount was introduced back in 2011 to support people on low-incomes and those vulnerable to the cold or in fuel poverty. The scheme is a one-off payment to help reduce eligible customers’ electricity bills over the winter months and it does not affect any entitlement to the Cold Weather Payment or Winter Fuel Payment.
What are the recent changes to the Warm Home Discount Scheme?
1. The government has announced that the payment will increase by £10 (from £140 to £150) this winter 2022-2023;
2. The government has changed who is eligible for the Warm Home Discount, which will see nearly 300,000 households (disability benefit claimants) miss out but an additional 750,000 households will receive the energy payment;
3. Most eligible households will now receive the payment automatically; and
4. The scheme is also extended until 2026.
Who is now eligible?
There are 2 ways to qualify for the Warm Home Discount Scheme:
1. Those receive the Guarantee Credit Element of Pension Credit, their name/ partner’s name is on the bill and their energy supplier is part of the scheme (‘core group’)
2. Those who are on a low income, receive certain means-tested benefits, their energy supplier is part of the scheme and they meet their energy supplier’s criteria for the scheme (‘core group 2’)
The energy supplier must also be signed up to the Scheme. Under the new rules, those in receipt of the Guarantee Credit element of Pension Credit will still receive the Warm Home Discount.
Those in core group 2 will receive a letter from October informing them that they will either receive the rebate automatically and therefore do not need to do anything, or that they may be eligible but will need to call a dedicated helpline to provide further evidence of their eligibility.
For those with pre-pay or pay-as-you-go meters, they can still qualify and their electricity supplier can tell them how they will receive the discount if they are eligible.
Park (mobile) Homes can also be eligible and applications open in the autumn for those who pay their electricity bills directly to their park site owner. These applications are considered on a first come first served basis.
Is the scheme effective and what is the impact for the future?
Although a £150 direct rebate to help toward the costs of electricity bills for eligible households is a step in the right direction, there is growing concern that the government’s scheme will only scratch the surface of the crisis.
There are many customers who are not on means-tested benefits, like Personal Independence Payments, are receiving Pension Credit or are just above the benefit level, who are also struggling with extremely high energy bills. Additionally, discounts may not be applied until later in the winter and into the spring, which means that families still face the upfront costs of energy bills in the lead up to Christmas. Households have been encouraged to make cutbacks to improve energy efficiency. However, these cuts have already been made and millions of households are still struggling. There is a danger that most households will still be unable to pay their bills despite saving energy and the £150 direct rebate.
There are calls for the government to rethink current strategy and use predictions of energy price hikes to continuously review any support packages. The fuel poverty charity, National Energy Action, has called on the government to increase the Warm Home Discount and wages to reflect the new costs of living. There could also be a push for the government to impose a tougher windfall tax on energy firms. Some companies like Centrico and Octopus have showed their support for a two-year freeze on consumer payments.
At this point in the crisis, we need alternative fall back strategies like these to provide real support.
For more information on other schemes and to find out if you’re eligible, please visit the Citizens’ Advice Bureau.