(2 days, 18 hours ago)
Grand CommitteeThat the Grand Committee do consider the Warm Home Discount (Amendment) Regulations 2025.
Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee
My Lords, these regulations were laid before the House on 19 June 2025. Before I proceed, I draw the Committee’s attention to a correction slip that was issued on 4 July in relation to the draft instrument. It corrected a typographical error on page three of the draft regulations that are the subject of this debate. The change was from Her Majesty’s Treasury to His Majesty’s Treasury. Clearly, this does not affect the substance or intent of the legislation.
In February 2025 we consulted on expanding the warm home discount scheme, which provides low-income and vulnerable households with a £150 rebate off their energy bills. Today, we are considering the regulations that will allow us to implement those changes and bring this much-needed relief to around 2.7 million additional households. Since we took office, this Government have been committed to alleviating fuel poverty. Our review of the 2021 fuel poverty strategy made clear that progress has stalled and that we need a new plan to speed up progress on tackling fuel poverty. There are two principal ways of doing this. The first is by improving household energy performance and the second by expanding direct bill support to make energy more affordable.
Starting with the first, at the spending review in June, the Chancellor confirmed £13.2 billion for our warm home plan that will transform the housing stock and improve energy efficiency across the country, ensuring that less money is wasted on leaking, ageing homes that are expensive to heat. However, while we press on with that vital work, we recognise that many households remain at risk of fuel poverty and cannot wait until later in this Parliament to feel the benefits. That is why we are also expanding the warm home discount, providing vital support to those who need it most. This support will be available immediately, coming into effect this winter and, importantly, consumers do not need to take any action to receive it.
Since 2011, the warm home discount has helped around 3 million low-income and vulnerable households every year by reducing their energy bills when it is most needed. Under the current scheme, around 1 million low-income pensioners in receipt of pension credit guarantee credit receive the £150 warm home discount as an automatic rebate on their energy bills, and more than 2 million low-income and vulnerable households also receive rebates.
The statutory instrument before us seeks to amend the Warm Home Discount (England and Wales) Regulations 2022 to allow changes to the eligibility criteria for this coming winter so that more households can receive rebates. It will also extend the time period in which rebate notices can be issued to suppliers, so that as many as possible can be issued before the current regulations expire on 31 March 2026. The SI also amends the Warm Home Discount (Scotland) Regulations 2022 to increase suppliers’ non-core spending obligation by an amount considered to be commensurate to the expected increase in England and Wales.
This SI is a result of our consultation in February, in which we proposed to remove the high cost to heat threshold that we believed was unfairly excluding some vulnerable households from the scheme. This threshold often meant that families in almost identical circumstances were treated differently, with some receiving the rebate while others missed out. The current system also excludes many households in smaller properties because their home is not classified as high cost to heat, meaning that our support has not been reaching some of those who need it the most.
Removing the high cost to heat threshold will make all energy bill payers who receive a qualifying means-tested benefit eligible for the warm home discount. By bringing around 2.7 million additional households into the scheme, it pushes the total number of households that will receive the discount in winter 2025-26 up to around 6 million, which is one in five households in the UK.
We have a statutory duty to tackle fuel poverty. It is our duty as a Government to break down the barriers that prevent some of the most vulnerable families in the country receiving the support they need. The proposed regulations will help us to achieve this. I beg to move.
My Lords, I thank the Minister for presenting the draft regulations before us. I am conscious that this is not her department. Nevertheless, with her Cumbrian background—not just background but experience—she will be conscious of the number of families in fuel poverty, in particular those off the gas grid.
One of the challenges around the warm home discount is that it is focused solely on electricity bill payers, so there are some issues there around aspects of fuel poverty and how it gets distributed. I am conscious that it has generally been a success; I am going to sound a note of caution though. This looks like a potentially generous package. Of course it is: it is the second, if not the third, package brought in by this Government that is very generous to households that receive universal credit. We have seen the extension of free school meals. With the Royal Assent coming through today, we will see a big uplift for everybody who is on universal credit. I think that the Government underestimated how much all this is going to cost, partly in the impact assessment for the Act that has just gone through but also in these regulations. Even now, there are more people on universal credit than it seems has been considered by the impact assessment for these draft regulations.
There is also a different way of thinking about this. These measures are increasing incentives for people not to increase their earnings and to stay on universal credit as long as they can. That is part of what the Government need to think about in these regulations.
There is another oddity here. Changing the criteria will mean the number of households receiving the discount rising from an estimated 3.4 million—around 3.1 million in England and around 300,000 in Scotland —to an estimated 6.1 million, although I think that it will be a lot more and it will, therefore, cost a lot more. People’s average energy bills will go up by about two-thirds, but everybody pays that levy. Consequently, those estimated 3.4 million people will be worse off as a consequence of the rebate now applying to a lot more people. Before, the cost of the levy was estimated at £22. The net effect is £150 minus £22, which is £128. With the average levy now going up to £37 a year, the logical consequence is of that benefit ending up dropping to £113 per household. I appreciate that the finer points may not work out quite like that in some of the calculations, but the Government cannot do this in a very detailed way. So we are in this odd situation where those households with the highest estimated energy costs will get less rebate to help them; I do not understand how that is going to help fuel poverty.
I appreciate, by the way, that the Minister does not have policy responsibility here. I am not sure what sort of response I might get from DESNZ, but it would be quite useful to get some thinking on that.
The reason why I think the costs here have been underestimated is that, in May this year, the UC statistics showed that 6.6 million households were on universal credit, 6.1 million of which are getting payments. That is not simply the transfer from existing legacy benefits to universal credit; there is an element of that, but that number will continue to increase because people are still claiming universal credit. On top of that, there are around 1.4 million people receiving pension credit and around 1.1 million pensioners receiving housing benefit. This is why the figures start to get bigger and bigger. There will undoubtedly be an overlap between the 1.4 million on pension credit and the 1.1 million on housing benefit; nevertheless, this will show, I think, that the costs here have been underestimated. I fear that the levy will, in effect, be higher for other bill payers. It is not the same as the winter fuel payment, because that came from taxpayers—this is coming from every bill payer.
I should also point out to noble Lords, based on a response to an Answer, that there are 200,000 households on universal credit with an income of more than £35,000. They will continue to receive this benefit now. The brilliant DWP—I love it so much—is fantastic at getting the matching. So I would be grateful to understand why DESNZ estimates that 28% of the 8.1 million people it thinks are eligible for this will not receive the warm home discount due to data-matching. Surely more should be done to kick the energy companies. I am concerned that park home residents are excluded. They are a particular group who have a nice life but tend to be on pretty low incomes, but I understand some of the complexities.
I found it astonishing in a different way, although it was perhaps a bit welcome, that there was a 150% uplift of people receiving this in London compared to the rest of the country. That is pretty high, given that more than double the number of households in the south-east will receive this. Clearly, this has not necessarily been done on what might be considered traditional regional adjustments. It is important also, regarding aspects in annexe 5 of the assessments, that the NHS estimates that the preventable costs would be about £540 million. Now the cost on these bills is going up to £1 billion, but I am convinced it will be more like £1.1 or £1.2 billion.
Of course I am not going to try and vote down this instrument, because that is not what we do in the Lords. I wish I had spotted the consultation earlier so that I could have contributed then but, when we come to the post-implementation review of the regulations in a few years’ time, the figures will be telling and Ministers should be looking out for this a lot more quickly. Genuinely, the impact will be that benefits from this levy will decrease, as opposed to increase.
My Lords, I thank the Minister for stepping into the breach and presenting the regulations in the form of the statutory instrument before us. I share and echo the concerns of my noble friend, without going into any great length, who was an excellent Secretary of State at the Department of Work and Pensions at a most difficult time during Covid—a big applause to her and her department at the time, and the work that it continues to do.
I welcome much of the content of the regulations. I forgot to declare my interest as president of National Energy Action and co-chair of the All-Party Parliamentary Group for Water, which will be significant when I come on to smart meters. However, the Whip on duty will remind me that I have said this in the past, so I am going to say it again because I want to record it at every opportunity. I do not know if it is something that the department might look at but, if the noble Baroness is not able to answer today, can she write and place a copy of the letter in the Library? Those households that are most in need of energy, such as in the north of England, Scotland and many vulnerable areas would have qualified for, say, £300, so fewer households would have benefited, but it would have had a much bigger impact on fuel poverty in that regard. Is that something that the Government are minded to look at?
Again, it is not part of these regulations but it is something that National Energy Action would like to place on the record but that I do not necessarily agree with. It would like to see a social tariff. My understanding is that there was a social tariff for energy prior to the warm home discount. I was trying to explain to NEA that you either have one or the other. Social tariffs operate quite effectively in the water sector, but I do not see how we can have both. I presume that that is something that the department under successive Governments has looked at. I should like to find out and have placed on the record for National Energy Action’s benefit what the current Government’s thinking is. Are we going to stick with the warm home discount, which would be my preference, or are we going to have both a warm home discount and the social tariffs?
My more radical thinking, when the Minister was referring to the contents of the regulation and the result of the consultation, was about transforming the housing stock. The Government have granted £13.2 million, not an insignificant sum of money, in that regard. I have a mounting concern that there is housing stock—I see this locally, and I am sure it is in other parts of the country as well—that would benefit from just a bit of an upgrade in having double-glazed windows and maybe a bit of stuff in the wall cavity areas and the roofs to make those houses more habitable. Obviously that would reduce the cost of heating, so it is not going out the window or through the walls, so to speak.
The plan I propose is that we reverse VAT. Take VAT off renovations and put it on newbuild. That way, I argue that it would be neutral. Obviously, it would pass on to the purchasers of new houses, but it would greatly increase the housing stock. Again, that is not in the regulations, but is it something that the Government might consider?
In preparing for today, I am grateful to the Secondary Legislation Scrutiny Committee for its 30th report, where it did a short analysis on this. Its conclusion, as my noble friend Lady Coffey referred to, was:
“We note that the percentage increase in the levy on billpayers and the impact of the expansion of the Scheme on the number of recipients and overall spending are expected to be significant”.
It is no secret that the major parties are deeply concerned about the cost of living crisis, which is ongoing. We have had the higher cost, for those who are not on a fixed tariff, of energy prices going forward for this winter. As my noble friend pointed out, that is going to mean a higher increase for those households that do not benefit to pay for the significant amount of money, which we know to be approximately £1 billion, up from £600 million in the past.
The Government could look at other measures as well. I have long been interested in the possibility of having a smart meter. Anna Walker did a report on water efficiency at the same time as there were the reports by Martin Cave on competition and Michael Pitt on flooding in about 2007 or 2008. Of those three reports, the Walker report on water efficiency never really got any legs. However, she gave very useful advice like, “Don’t run your water when you’re brushing your teeth, but in particular don’t run the hot water because you’re literally putting hot water that you have heated down the system, which is ridiculous”.
Is there a possibility that energy and water would both be governed by the same smart meter? Are the Government aware that currently—my authority for this is the Radio 4 programme “You and Yours”, which I happened to listen to on, I think, Friday—there is evidence that smart meters do not work in rural areas? I know the Minister lives in a deeply rural area. I have been reluctant to fit a smart meter for that reason; there is no point in having one fitted if it is not going to work. Apparently they will give you all these other gadgets to help it work, but still it will not.
If smart meters are not working and people are not able to monitor true energy use then that is one point, but if we were able to develop smart meters that covered both water consumption and energy consumption then that would be a big plus for households. So I give a cautious welcome to these regulations, and I am grateful for the opportunity to make the few comments that I have.
My Lords, this instrument brings forward much needed and real expansion of a vital scheme that we believe will have significant positive impacts. We welcome the proposed expansion of the warm home discount, which aims to bring financial relief to millions more households across Great Britain that are grappling with the brutal realities of fuel poverty and escalating energy bills.
What we have here is, in essence, a doubling of those who will be eligible for the £150 rebate on energy bills. This will bring vital relief to many families who are struggling, but the scale of the challenge is immense. In England alone, some 2.7 million households are trapped in fuel poverty. The average fuel poverty gap has soared to an alarming £407—a near 60% increase since 2020 in real terms. Disturbingly, the number of households forced to spend over 10% of their income on energy bills, after housing costs, has more than doubled since 2020 to 9 million households in 2024. Furthermore, energy debt and arrears hit a record £3.85 billion in December 2024.
My Lords, I am grateful for the opportunity to speak to this statutory instrument, which proposes a further expansion of the warm home discount scheme.
I start by confirming that His Majesty’s loyal Opposition fully support the principle of shielding vulnerable households from fuel poverty. The extension of support to an additional 2.7 million households, including working-age families with children, is of course a positive and welcome step, particularly as we approach another potentially challenging winter. There is no doubt that many people will benefit from this measure.
However, while the Government’s intentions are commendable, their method of implementation raises important questions. Our understanding is that this expansion is not being funded through general taxation or through efforts to improve efficiency within the energy system. Instead, it relies on increasing green levies on energy bills—the very costs that will be borne by working households. According to the Government’s impact assessment and as we have heard from noble Lords, this will result in an average increase of £15 per household per year, bringing the total cost of the warm home discount to £37. That represents a 60% rise to the average dual fuel bill payer, and it should be highlighted that this was not prominently featured in the announcement. This approach surely risks creating a circular dynamic. Higher energy costs driven by policy decisions are then partially mitigated by support schemes funded, conversely, by those same rising costs. While the short-term relief is real, the medium- to long- term implications deserve scrutiny.
We must also consider the broader context. The Government have pledged to reduce energy bills by £300 per year, a commitment that seems increasingly difficult to reconcile with policies that contribute to rising costs. This statutory instrument, while helpful to some, may inadvertently deepen our reliance on cross-subsidies to mask the underlying changes in our energy strategy. The ambition to reach clean power by 2030 is totally laudable, but challenging. If the path taken results in higher bills for ordinary working families, we must ask whether the strategy is serving its intended purpose. Would it not be optimal to agree that clarity and simplicity often yield the best outcomes? If our goal is to reduce fuel poverty, which it absolutely should be, then should we not focus on making energy supply more abundant and affordable, not more expensive and constrained?
A more balanced approach to funding the energy transition is needed, one that prioritises domestic supply, domestic storage and nuclear alongside renewables. It is time for greater transparency about the costs and trade-offs involved, because the current path places a disproportionate burden on those hard-working people least able to bear it. For these reasons, while we support the principle behind this measure, we urge the Government to reconsider the funding mechanism and the broader strategy that it reflects.
My Lords, I thank all noble Lords who have taken part in this important debate on an important issue for their contributions and for the broad support that the Committee has expressed for this statutory instrument. I shall cover the questions as best I can. First, the noble Baroness, Lady Coffey, talked about the fact that the scheme relates to electricity bills. She referenced the issues around rural heating—she mentioned Cumbria, where I live. It is a real issue for rural areas. We need to move away from fossil fuels. There are some challenges in rural areas on how we do that. I know that the department is working hard on this to understand those challenges because the transition needs to be countrywide, not just in one area and not another.
The noble Baroness also asked about universal credit. It is probably best if I ask my colleagues in the DWP to respond to that because I do not have the information and officials in DESNZ would not, so we will pass that on to the DWP if that is okay with her. She also asked about lower benefits to households. I stress that the impact assessment is based on our best estimates, but its purpose is to help those who are on low-income and means-tested benefits because that is the best way for us to get directly to the people who need the most support.
I thank the Minister for her response. There were a few questions, which I believe her officials will have noted. I appreciate that UC and DWP are different, but the Secondary Legislation Scrutiny Committee said that DESNZ assumes that 28% of people will not get this discount despite the other matter. I am sure that the Government will get the other Minister—the one from DESNZ—to reply, but I am grateful to this Minister for her responses so far.
I am sure that we can comb through Hansard and make sure that proper, detailed information is provided to the noble Baroness on the issues that she raised.
This scheme has been running for 14 years now. Over that time, more than £4 billion-worth of direct assistance has been provided to low-income and vulnerable households. These regulations will build on that legacy by allowing support to reach more people this winter, including vulnerable households that were previously shut out of the scheme.
I have a point of clarification. The Minister responded to me most kindly about how the Government are going to invest in SMRs. I know that, if the noble Lord, Lord Howell of Guildford—a former Secretary of State for Energy—were here, he would stand up and say, “I’m speaking to all the SMR providers. They’re saying to me that they are ready to go. They’re doing it with other countries, but they need more progress from the UK”. Can the Minister come back to us at some point with a bit more detail on when are we going to see some progress with the SMRs? What is holding us back? Can we action this urgently?
I am sure that the noble Earl and his colleagues are aware that we have made a very strong commitment to nuclear energy and are pushing forward on that in a way that previous Governments have not done. It is really important that we are investing in nuclear energy with that commitment. The department is working up exactly what that will look like; I am sure that, when the time is right, the noble Earl and his colleagues will hear more about SMRs.