Chancellor announces cost of living support package

Chancellor Rishi Sunak announced a package of measures on 3 February 2022 intended to limit the impact of rising costs on households, following Ofgem's announcement that the energy price cap would rise by £693 a year in England, Scotland and Wales from April, taking the average customer's bill to £1,971¹. Sunak said the help aims to "take the sting" out of the price rises and spread the extra energy costs over time¹.

In England, households in council tax bands A to D will receive a £150 rebate in April 2022, which does not need to be repaid and is not means-tested¹. Local authorities are expected to credit accounts in April, using saved bank details for those paying by direct debit¹. Scotland's finance secretary Kate Forbes announced on 10 February that 73% of Scottish households, about 1.85 million, would receive a £150 rebate in April, going to those in bands A to D and those in all bands covered by the council tax reduction scheme¹. On 15 February, Welsh finance minister Rebecca Evans set out £150 rebates "as soon as possible" for households in bands A to D and those in the council tax reduction scheme¹. The devolved nations are expected to receive £565m of Barnett funding as a result of the English rebates, and Northern Ireland around £150m of comparable funding next year, as energy policy is devolved¹.

All domestic electricity customers will receive a £200 credit on their energy bill in October 2022, which the government will initially meet but which customers repay in £40 instalments over five years from 2023¹. A £144m discretionary fund will go to local authorities to help low income and vulnerable residents, particularly those who do not pay council tax or live in bands E to H; eligibility and amounts will vary by council¹. The Chancellor also confirmed plans to expand the Warm Home Discount, expected to reach 3 million households, with a £10 uplift to £150 from October; more detail on qualifying households is to be published after a consultation¹. The discount is currently paid to those receiving the guarantee credit element of pension credit, or on a low income or certain means-tested benefits, with each supplier applying its own criteria¹.

Why it matters for households

The rebate is a one-off £150 payment per eligible household, not a reduction in ongoing council tax, and it is not means-tested, so entitlement follows the property's band rather than income¹. The £200 energy credit is a loan: it lowers bills in October 2022 but is recovered at £40 a year from 2023¹. StepChange said the February measures included a one-off council tax rebate for 80% of households in April and a £200 energy loan in October to be paid off over five years³. The Resolution Foundation said the rebates, over half of which are loans, cover half of the rising energy bill costs for many, but leave the poorest households facing a large hit from April, and that one in eight poor families will not get the £150 rebate⁴. Gingerbread said the measures are unlikely to scratch the surface for single parent families, citing analysis that single parent households will pay 22% of post-housing income on energy bills and that 75% of single parents receive Universal Credit⁵. StepChange said energy bills are set to rise by 54% in April, with experts predicting standard fuel bills of £3,000 by October, and that around £1 in every £6 spent by the poorest households will go on energy bills from October, up from £1 in every £14³.

What happens next

Rebates are expected in April 2022, the £200 credit in October 2022, and repayment of that credit in £40 instalments over five years from 2023¹. The £10 uplift to £150 for the Warm Home Discount is planned from October, with qualifying details to follow a consultation¹. Gingerbread called for benefits including Universal Credit to rise by 6% in April rather than the 3.1% expected increase⁵. StepChange called for benefits to be uprated by 7% and for the Warm Home Discount to be expanded so that all people on means-tested benefits and pension credit are automatically supported³.