My Lords, these regulations were laid before the House on 12 May.
For 11 years, the warm home discount scheme has ensured much-needed support to millions of households. Since it began, it has provided more than £3.3 billion in direct assistance to households. Primarily, this support has taken the form of direct rebates off household energy bills.
The Government committed in the 2020 energy White Paper to extend and expand the scheme and to reform it better to target households in fuel poverty. These regulations provide for that expanded and reformed warm home discount scheme in England and Wales. Under the regulations, the scheme is set to last until 2026. The regulations succeed the previous warm home discount regulations in England and Wales. The Government will lay separate regulations for an expanded warm home discount scheme in Scotland, which will be debated separately.
The regulations have six main provisions. First, the expanded annual spending envelope is set in the regulations. For winter 2022-23, the spending envelope is £474 million, rising each year thereafter. Secondly, participating energy suppliers will be obligated to provide rebates directly off the energy bills of fuel-poor households. The value of the rebates for households is set at £150—an increase of £10. This means that around 2.8 million households will receive a rebate every winter. Thirdly, the scheme will continue to provide rebates to pensioners on the lowest incomes—those in receipt of the guarantee credit element of pension credit. This “core group 1” of eligible pensioners, as it is known, has been a key feature of the scheme throughout its existence.
Fourthly, there will no longer be a “broader group” of other low-income and vulnerable households. Under the former scheme, this group was required to apply to their supplier every year for a rebate. Even if eligible, these households were not guaranteed to receive a rebate, and the criteria varied by supplier. The Government are therefore creating a “core group 2” of households on the lowest incomes and with the highest energy costs. Eligible households will be those in receipt of one of the qualifying means-tested benefits or tax credits and meeting a high energy cost threshold. These households will be identified through data matching using benefits data, property characteristics data and energy supplier customer data. The Government intend to publish a statement setting out the exact details of the eligibility, including the high-cost threshold.
Fifthly, these regulations make it mandatory for suppliers to contribute to Industry Initiatives. Industry Initiatives allow suppliers to fund other financial and energy-related measures such as financial assistance payments, debt write-off, benefit entitlement checks, energy advice and energy efficiency measures. Industry Initiatives will be set at £40 million for this winter and rise each year thereafter. The regulations also set minimum obligations and caps regarding financial assistance. This recognises the value that they provide, while ensuring that other high-value Industry Initiatives measures still receive funding.
In addition, the Government are maintaining aggregate and household-level caps on debt write-off to avoid this measure being misused to reduce bad debt. The last Industry Initiatives restriction is to limit the number of mains gas-powered boilers and central heating systems that can be installed. These will still be permitted to support particularly vulnerable customers during emergencies but will be restricted to align with the heat and buildings strategy.
Sixthly, and finally, the regulations set the thresholds for suppliers participating in the scheme. The Government are lowering the thresholds so that more suppliers participate, and to reduce the barriers to customers switching suppliers. In 2022-23, the threshold will be set at 50,000 domestic customer accounts; from 2023-24, it will be set at 1,000 accounts. This means that 99.9% of the market is covered.
The Government are expanding the scheme to provide rebates to 750,000 more households. Thanks to these reforms, the vast majority of eligible households will receive their rebates automatically, without having to apply. A small minority will be contacted and required to contact a helpline to confirm their details.
The Government’s analysis shows that, by focusing support on households on the lowest incomes, the fuel poverty targeting rate will increase to 47% overall and 560,000 more fuel-poor households will receive a rebate compared with an unreformed scheme.
The Government held a consultation on these reforms last summer and we published our response in April. The consultation responses supported extending and expanding the scheme as well as proposals for reform. The Government are proceeding with the main proposals; however, we decided to make a number of changes in light of the consultation responses. We have added housing benefit to the list of qualifying benefits, and
tax credits in the eligibility criteria for core group 2. Energy suppliers will be required to provide estimates of the value and proportion of spending under industry initiatives in relation to households where a person has a disability or a health condition. This will enable the Government to monitor the level of support provided to disabled customers. The Government have removed the proposed mid-year adjustment to the Industry Initiatives budget. This risked creating significant uncertainty and delivery risks. Lastly, the Government are keeping the overall debt write-off cap under Industry Initiatives at £6 million per year.
The warm home discount remains a source of critical support for many low-income households. The regulations extend this scheme, expand the support to more households and focus that support on those most in need. I therefore commend these regulations to the Committee.