Briefing on the Warm Home Discount 2022 - 2026 Consultation

01/07/2021

AgilityEco welcomes this week’s publication of the Government’s consultation on the future of Warm Home Discount (WHD) for the 4 years from April 2022. The deadline for responses is 22 August and AgilityEco will of course be submitting a response to this key consultation. We are also keen to receive comments and thoughts from our partners. We would urge as many of our partners as possible to respond to this important consultation which will underpin the support for the vital services we provide to customers in difficult situations in the coming years. We will provide a briefing with points for partners to consider including in their responses closer to the consultation deadline.

Our initial thoughts on the consultation are as follows:

Changes to Warm Home Discount rebates
  • Most of these changes were trailed in the Energy White Paper and are now confirmed with much extra detail: The scheme will be extended for four years from April 2022 to March 2026 and its value will rise from £350m a year to £475m.
  • Rebates will rise from £140 to £150 per household and the Government estimates that the number of households receiving support will increase by 780,000 to around 3 million.
  • The current Core Group, focused on rebates to households in receipt of Pension Credit Guarantee Credit, will continue but be renamed Core Group 1. The Broader Group will be discontinued to be replaced by Core Group 2. This will comprise households on means-tested benefits (plus Tax Credits with an income threshold applied). The big underlying change here is that rebates for both Core Groups 1 and 2 will be issued automatically using data from the Department for Work and Pensions, HMRC and the Valuation Office Agency (VOA). Previously those eligible under the Broader Group had to apply for rebates with no guarantee of success as total eligibility outstripped the available funding.
  • As well as making the scheme more efficient the Government is also seeking better targeting on fuel poverty by focusing on households on low incomes and with high energy costs. They estimate that the proportion of households in fuel poverty supported under the scheme will rise from 37% to 47%. A key set of households receiving extra support will be low-income families with children. This does mean that households with occupants on (non-means tested) disability benefits will no longer be eligible for rebates. We recognise this as a difficult decision but one that is necessary to tighten the fuel poverty targeting. The consultation explains the other forms of support that are available including the potential for creation of a new, dedicated Industry Initiatives scheme. We and our partners will redouble our efforts to ensure that our support services, funded in part through Industry Initiatives, reach as many households living with disability and ill-health as possible.
  • The revised scheme will operate across England and Wales. Scotland will receive a proportion of the total funding to introduce its own version. This is partly because the necessary powers are devolved to the Scottish Government and also because Scotland does not have the same access to VOA data. The Secretary of State will maintain certain reserved powers over the Scottish scheme including approval of the Scottish Government’s proposals and setting spending targets.
  • The thresholds at which energy suppliers are obligated under WHD will fall to 50,000 customer accounts in 2022/23 and then to just 1,000 the following year.
Changes to Industry Initiatives

AgilityEco’s main interest in WHD, and that of many of our partners, lies with the Industry Initiatives element. We see many of the proposals as positive and will be offering our full support, but there are also a few that will require more careful consideration and where we might argue for changes:

  • Industry Initiatives will move from being optional for suppliers to being mandatory and the forecast spend will be set in legislation. This is very good news. The only disappointment is that continuing with Industry Initiatives will not be mandatory where a ‘Supplier of Last Resort’ is appointed to take over a failing supplier’s customers.
  • For the first year of the new scheme, Industry Initiatives are forecast to be funded at £40m. There is an interesting chart on Page 47 of the consultation document showing Industry Initiatives rising from £40m to £65m by the final year of the scheme. This increase will be the result of inflation being applied to the total WHD pot, but with the spend on Core Groups 1 and 2 remaining roughly constant. Increases to Industry Initiatives at this scale would be a tremendous opportunity to make more of the excellent value that Industry Initiatives deliver, something that is recognised in the consultation.
  • Unfortunately we see that there is still risk and unpredictability as Industry Initiatives will continue to act as a ‘buffer’ in terms of being the element of the scheme where spend is adjusted as a result of lower or higher spending on rebates. Given the big changes to the policy on rebates, those risks will be particularly high in the first years of the revised WHD.
  • The Government has set out quite a complicated mechanism by which Industry Initiatives will be adjusted. That mechanism will at different points consider expected changes in the recipients under the Core Groups for the current year as well as actual changes against the expected changes for previous years. An adjustment can be made at the start of the year then also in-year following the data-matching process that will determine the number of rebates. There is a welcome cap of £10m on adjustments to Industry Initiatives (up or down) from year to year. But we want to look at this more closely and consider if any simplifications could be suggested. It is also the case that if there were an adjustment as big as £10m, especially in the first year when Industry Initiatives starts at the £40m base level, then it would have a very detrimental effect on scheme delivery. So we will be considering whether we can suggest further protections, for instance allowing the adjustments to be absorbed across multiple years or starting with a higher spend level in Year 1.
  • In terms of the specific operation of Industry Initiatives, key proposals include:
    • It is proposed that the cap on spending on financial assistance is increased from £5m to £10m and that a new minimum spend of £5m is introduced. We recognise that this is being done because of concerns about households that are struggling as a result of the COVID pandemic. But we will want to consider whether there are better ways to provide the support needed.
    • Spending on debt relief is to be focused on people with pre-payment meters at risk of self-disconnecting. The consultation asks whether the cap should be reduced from £6m to £5m, something we would support.
    • Industry Initiatives will continue to support the installation of mains gas boilers and central heating systems. This will be allowed where a person in the home has a specific vulnerability to the cold, including those over 65 or under school age. There will be a cap on spend on boilers of £8m. We think this is a sensible decision and agree with the consultation that it is necessary because “currently, there is no lower-cost alternative to gas boilers or gas-fuelled central heating systems”. The Government will keep under review whether the position changes as new technologies become cheaper and more readily available.

Hopefully this briefing has been helpful and we welcome any comments. Please get in touch with our Policy & Partnerships team with your thoughts.