The Institute for Fiscal Studies (IFS) has sharply criticized the UK government’s handling of energy price support schemes, claiming it could have saved the nation £4.5 billion by implementing more effective designs. This claim was raised in the IFS’s recent report titled "How Should Governments Help Households During An Energy Crisis?" which thoroughly analyzed the state energy bill support established during the turbulent energy crisis of 2022/23.
According to the report, the existing schemes were poorly targeted and inadvertently promoted excessive energy consumption. Key components of this critique focused on the Energy Price Guarantee, which set average annual bills at £2,500, and the Energy Bills Support Scheme (EBSS). The EBSS allowed households to receive a £400 reduction on energy bills, distributed across six payments starting from October 2022.
Peter Levell, the IFS's deputy research director and author of the pivotal report, noted the immense financial burden these measures imposed. "The cost of supporting households through the energy price spike of late 2022 and early 2023 was extraordinary – £35 billion over a six-month period," he stated. This funding is said to exceed half of the entire annual budget allocated for schools.
Levell also explained the unintended consequences of how assistance was distributed to households, stating, "The way transfers were paid affected how they were spent." For households with prepaid energy meters, the £400 rebates were issued as vouchers and automatic top-ups for smart meters during the winter season of 2022/23. This structure meant most households likely expended more than £400 on energy without the rebates, which diluted the intended economic support.
A significant factor behind the overwhelming cost was the government’s lack of precise information about households with both low incomes and high energy usage. Consequently, policymakers opted for universal financial assistance, which failed to effectively target those most in need. Levell emphasized the importance of utilizing taxpayer funds judiciously, pointing out, "a big part of the help came through lower energy prices, which increased demand and escalated support costs. Investing now in refined data collection and analysis could lead to substantial savings should similar energy price crises occur in the future."
Given the comprehensive findings from the IFS, stakeholders and politicians alike are encouraged to reconsider the strategies deployed to assist households amid energy crises. This may involve not only re-evaluated distribution methods but also refining criteria to accurately determine which households qualify for such support.
The looming question now remains: how will the UK government reform its approach to energy price support moving forward? Only time will tell if these criticisms lead to meaningful changes or if similar patterns will repeat themselves during future crises.