Laura Suter, head of personal finance at AJ Bell, comments on reports that the government has extended the Energy Price Guarantee:
“The news of the additional energy support is no huge shock, with the government leaking more than an old boiler ahead of the Budget, but it will still be a big relief for many households who were looking down the barrel of another huge jump in energy costs from next month. The move today means we’ll all be protected from an increase in bills for another three months, when hopefully the weather will be warmer and wholesale energy prices will have fallen again.
“It’s a no brainer for Chancellor Jeremy Hunt to extend the Energy Price Guarantee, as the previous plan to make it less generous at the same time as stopping the monthly rebate we’ve all been getting off our bills would have landed the average household with an extra £900 on their annual fuel bills in one swipe.
“Falling wholesale energy prices have played into the government’s hands, as it expected to spend £12 billion on the Energy Price Guarantee but the final bill came in at £4 billion. Even by extending the measure at £2,500 the government will still come in under budget, with the move costing an additional £3 billion. The government gets a double boost from the move, with households having lower bills and those lower energy costs helping to squash inflation – which is crucial if they are to meet their self-imposed target of halving inflation before the end of the year.
“A key part of the announcement is also that those on pre-payment meters will no longer have to pay higher rates for their energy. The topsy-turvy policy means that currently the poorest and most vulnerable households pay higher costs for their energy than the wealthiest in society. Why it’s taken the government until the tail end of the cost-of-living crisis to fix this anomaly will baffle many.
“It’s a confusing situation for billpayers, who are having to keep track of two price capping systems: Ofgem’s energy price cap and the government’s Energy Price Guarantee. The hope is that by the next Ofgem announcement the price cap will have dropped below the government’s £3,000 guarantee and average bills will be cheaper than that anyway. However, the past few years have taught us not to rely on predictions and there’s certainly no guarantee energy prices will drop that far.
“While the move will protect average households from an extra £500 on their annual bills, energy bills will still cost us all more. The £400 off bills the government has been dishing out this winter, to the tune of around £66 a month, will still end in April. At the same time, the Cost of Living support payments for those on certain benefits means that people will get £600 before the end of the year, rather than the £650 they got in 2022.
“The news will disappoint some campaigners who argued that the universal energy support should be ditched and more support offered to those on the lowest incomes. By scrapping the Energy Price Guarantee far more help per household could be offered to the poorest in society who are struggling the most with their bills. But by extending support for all Mr Hunt will have gone for the popular vote, rather than the more targeted help.”
Danni Hewson, head of financial analysis at AJ Bell, comments on energy support for businesses:
“After the disastrous bombshells delivered by last year’s ‘mini-Budget’, Jeremey Hunt has fallen back on the tried and tested formula of dropping hints the size of sourdough loaves in the days and indeed weeks ahead of his moment at the dispatch box. The news that household energy support will be maintained at the £2,500 mark took no one by surprise. It’s an easy win for the Chancellor and one with a limited shelf life as wholesale costs have fallen substantially, and the regulator’s price cap is likely to take up the strain from July.
“Keeping more money in people’s pockets should mean they have more of it spend on other things which should help beleaguered businesses, but they’ll be hoping Jeremey Hunt is keeping his powder dry when it comes to additional support for non-domestic users. From local swimming pools to those industrial sized greenhouses that grow our precious salad, energy costs have become enemy Number 1. This Budget might have been touted as one to stimulate growth but without extending help for business as well as households, growth might be difficult to incubate.”