The first official government total showed that the cost to the UK of keeping energy bills low for homes and businesses during the winter months has come to nearly £40 billion.
The Treasury set the final cost of keeping a lid on Britain’s energy bills at £39.3 billion between October 2022 and March 2023 after Russia’s invasion of Ukraine drove energy market prices to record levels.
It said the unprecedented jump in wholesale energy costs had forced the government to make its biggest-ever intervention in energy bills at a cost to the Exchequer of about £2,500 every second since October.
Household energy bills were on track to more than triple in a year’s time to an annual average of £4,300 in the first quarter. In response, the government has spent £21 billion to reduce the average dual fuel bill at £2,500 through the Energy Price Guarantee. It has spent a further £12 billion to give each household a £400 rebate in order to further reduce costs.
The National Audit Office (NAO) has criticized the schemes for providing subsidies to the millions of households who can still afford their energy bills. The Office of Internal Audit expected government support schemes to cost £69 billion, but low market prices have reduced the cost of programmes.
The Treasury also spent £5.5bn over the winter through the Energy Bill Ease Scheme, which offered rebates to businesses and public sector organizations such as schools and hospitals between October and March.
The government has sharply reduced subsidies as energy market prices have fallen from their highest levels last year, but experts have warned that market prices could remain well above pre-pandemic levels through the end of the decade, keeping 6.5 million households in fuel poverty.
Home bills are now protected by a price cap set by the energy regulator, Ofgem, which is the equivalent of £2,074 for the average household’s annual gas and electricity consumption from July, which is still double the rate before energy market prices started to rise.
Ministers have replaced the government’s energy price guarantee, and its one-off £400 grant, with a series of payments aimed at the most vulnerable that include £900 for those on tested benefits, £300 for pensioners and an extra £150 for the disabled.
However, about 1.7 million families living in extreme fuel poverty are expected to miss out on additional assistance because they are not registered for certain benefits, according to researchers at the University of York. It is estimated that these families include 688,000 fuel poor families with children.
A scheme to ease business bills has been replaced by a less generous arrangement that has left thousands of small businesses fearing bankruptcy before next winter.
Other government energy subsidy schemes, including support for households and businesses using alternative fuels ‘off the grid’, reached nearly £1 billion over the past winter, according to government statistics.
