What is the £140 discount scheme, who pays for it, do you qualify and does it go far enough?
The warm home discount scheme, which at the moment offers a £140 discount to those on certain benefits during the winter months, has come under the spotlight as ministers explore ways to tackle the impact of the energy crisis on household bills. The government has said the discount will be increased next winter, and the Labour party pledged it would add to the funding and expand its coverage.
The scheme offers vulnerable energy customers a discount on their energy bills each winter. Since 2014/15 the discount has been worth £140 a year.
Discounts are given automatically to people on pension credit, but other low-income households must apply and only get help if their providers offer the scheme and there is still money available. The money comes off bills, rather than being paid to customers.
The energy companies fund the discount, with the money coming from customers’ bills. The sums put in are mandated by the government. This year suppliers have put in a total of £350m, which has added about £14 to bills. Next year they will put in more – a consultation last year suggested £475m in total – which will cost customers £19. The Treasury does not currently add to the scheme.
Around 2m households currently qualify to apply – but not all will be able to get hold of the discount. If you are on pension credit you should have automatically been accepted. If not, you need to apply. Applications are currently only available to those on low incomes who receive certain benefits, including income support and universal credit, and meet other qualifying criteria.
More than 900,000 eligible pensioners who have not applied for pension credit are thought to miss out each year.
Only energy suppliers with at least 150,000 customers have to offer the discount currently, so those with smaller companies miss out.
When providers have allocated all of their required funds, schemes are closed.
EDF and Scottish Power have both already stopped taking applications. EDF said it had provided about 260,000 rebates worth a total of £36m. It said it had other support for customers, including a Customer Support Fund (CSF) for help with an outstanding debt or replacing essential white goods.
A Scottish Power spokesperson said the scheme had been open between August and December, as in previous years, and it had worked hard to raise awareness among customers, which had led to it being fully subscribed.
“Supporting customers in vulnerable circumstances is one of our priorities,” the spokesperson said.
“As well as the warm home discount, we offer a wide range of customer support – like our prepayment voucher scheme – and we also support a number of external industry initiatives. We would encourage any customers having difficulty paying their bills to contact us.”
Next winter the discount will go up to £150 and the government will change the criteria to focus on those in fuel poverty. This will only affect energy customers in England and Wales. The changes follow a consultation before the energy crisis took hold, which also proposed offering automatic payments to everyone who qualifies, rather than asking people to apply. The government has not confirmed that it will make that change.
It has also proposed to reduce the number of households who miss out because their energy provider is too small by lowering the number of customers a supplier must have to 50,000 in April 2022 and then to 1,000 from April 2023. At that point, the government said an estimated 99.99% of domestic customers would be with suppliers that had to offer the discount.
A business department spokesperson said: “As set out in the energy white paper, from 2022/23, we plan to extend the warm home discount until 2026, increase it by £10 to £150, and help an extra 780,000 pensioners and low-income families with their energy bills.”
Charities have welcomed the changes – Citizens Advice, for example, suggests the biggest problems with the scheme will be addressed. Gillian Cooper, head of energy policy at Citizens Advice, said currently rebates were unfairly distributed.
Because the number of rebates for each company is based on their customer numbers rather than need “every year we see clients who miss out on rebates because their supplier is oversubscribed. Conversely, some suppliers are unable to give out all the rebates they’re required to, because their customers are more affluent, and put the unspent money towards alternative support instead.”
However, others have called for the government to inject some money into the scheme so that discounts can be more meaningful.
The fuel poverty charity, National Energy Action says the government needs to pay in £500m to make sure those who qualify can all get the money and to increase the discount.
“As a very bare minimum, the scheme should at least be sufficient to make sure that everybody eligible for it should get it automatically,” says Peter Smith, director of policy at the charity. “A £500m injection from the Treasury would mean that everyone currently eligible could automatically receive a discount of just over £200.”
Adding government funding to the scheme would be cheaper than scrapping VAT on energy, a proposal that the government is understood to be considering. The end of VAT on bills would cost the Treasury an estimated £2bn and not be targeted at the households in greatest need.
