Draft Warm Home Discount (England and Wales) Regulations 2022

Caroline Johnson Excerpts

Wednesday 15th June 2022 General Committees

[Dr Whitehead]

My hon. Friend’s intervention emphasises my point. It also emphasises the danger of the scheme itself being price capped, and of the criteria for high energy use and how they relate to the physical characteristics of the low-income home being tweaked to fit in with the ceiling figures that my hon. Friend mentioned. I am sure the Minister will want to assure us that that will not be the case for how core group 2 develops.

We have other concerns with the detail of this instrument. When there is an issue with an energy company that is supplying a household—if that energy company goes into administration or disappears off the face of the earth entirely—the supplier of last resort who takes over from that energy company should take on the full obligation of the failed supplier. The Department has still not put into place an actual obligation for it to do so in this iteration of warm home discount guarantees and in the legislation.

It may be that the Minister considers that so many smaller energy companies have gone bust already that there is no need to have that obligation, because there are not many more that can go bust. I think we ought to keep a close eye on whether energy companies are either refusing or dodging the consideration that they should take on the full obligation, exactly as it was in respect of the energy company that the person was with before the change to supplier of last resort took place.

I am happy that the draft regulations include a reduction in the threshold that obliges energy companies to be involved. The Minister will know that there were a number of occasions on which switching resulted in someone thinking they were getting a warm home discount but not getting one because of the size of the customer base of the company they were switching to. That will be substantially resolved by the reduction of the number in the obligation threshold. It is tapered over years, so it goes down toward zero. That does not itself solve the problem of the supplier of last resort and the obligations that come from it. I hope the Minister can have a look at that for the future.

An overall point I would like to make about the terrain within which this change is being made is that it really is not strictly correct to claim—I am afraid the Minister is prone to doing so—that the money spent on this scheme, both historically and now, is somehow money that has come from Government. It does not come from Government. There is an obligation on energy companies to provide warm home discounts and then retrieve the money they have spent on those discounts from other customers. This particular iteration of the warm home discount is no different in that respect. It expands the total envelope available to £475 million, with a four-year extension, and it increases the payment by £10 to £150 a year. That extension will be recovered by the energy companies from customers, and in some instances they will actually be taking money back from people who receive the warm home discount so that they can give the discount in the first place.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

Forgive me if I have misunderstood, but the hon. Gentleman seems to be making the point that the money for the warm home discount will be coming back from customers and not from Government. Surely if the Government were to give out that money directly, it would have also come from those customers through taxation?

[Dr Whitehead]

Yes, that is indeed an alternative. That money could come from general taxation, as it does in some of the Government’s recent schemes—the boiler upgrade scheme, for example, is Exchequer funded. The money would come out of general taxation, but that is a very different issue from customer bills at the moment. Arguably, it is much more equitable in terms of the effect it would have on customer bills.

I am concerned about the extent to which a lot of Government schemes, such as the green gas grant and so on, are effectively funded by levies. Those levies go on customer bills. In this instance, according to the impact assessment, the measures we are debating will likely pass on to customers an increase from the £14 under the previous warm home discount scheme to about £19 for a dual-fuel account. That is no mean increase.

In the impact assessment, the Government estimate the increase of £5 a year in the average energy bill and state:

“However, given other price protection in place, including the energy price cap, the Government believes this is appropriate for providing help to an additional 750,000 households in or at risk of fuel poverty.”

The Government think it is fine to do that. However, that £5, therefore, together with probably £90 to come from the socialisation of suppliers of last resort and with a number of levies from other people, will be included in the price cap. As the price cap goes up next year, it will take account of the fact that about £100 of the increase is now on socialisation of the expenses to be incurred by energy companies, which have been taken account of by Ofgem in order to bring the price cap into place. That will add substantially to bills at a time when the last thing we should be doing is adding anything more to customer bills in general, given the desperate circumstances we are in.

I would advocate placing the increase into the same regime as that for the boiler upgrade scheme, putting it in as Exchequer funding. That has to be paid for, but it will be by a different and wider group of people, not by individual customer accounts as they come through.