Adam Scorer calls for 'targeted financial support' on energy bills
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Campaigners have told Express.co.ukChancellor Jeremy Hunt’s plan to slash the level of support the Government is currently providing businesses with could push more Britons into poverty and deal a huge blow to smaller firms. The Chancellor announced, following a meeting with business leaders on Wednesday, that the amount the state is spending to help businesses pay their energy bills is ‘unsustainably expensive”, stressing that the current level of Government assistance will have to come to an end in the coming weeks.
As energy prices have soared over the last year due to Russia’s war in Ukraine and gas supply cuts to Europe, the Government had to not only had to step to shield households from spiralling costs, but also businesses which had seen costs go through the roof.
To provide support, the Energy Bill Relief Scheme caps wholesale energy prices on electricity and gas at about half the expected market price for businesses. While this is set to come to an end in March, Mr Hunt has promised to announce the results of a review of the Energy Bill Relief Scheme in Parliament next week.
But following Mr Hunt’s meeting with the Confederation of British Industry, Federation of Small Businesses, British Chambers of Commerce, Institute of Directors, Make UK, UK Hospitality, and the British Beer and Pub Association, the Energy Bill Relief Scheme looks certain to change for the worse.
A Treasury spokesperson said following the meeting that no “Government can permanently shield businesses from this energy price shock”, adding that “the current scheme was always time limited to six months”.
But Alexander Kirk, a campaigner at Global Witness, has warned that “any cut in Government support” threatens to cause significant damage to those who need it most.
He told Express.co.uk: “Time and time again, this Government masks political decision-making as an economic necessity. Any cut in energy support will put more people in poverty, with the typical energy bill predicted to be around £2,800 for the second half of 2023 – still more than double 2021 levels.
“The money that is needed to cover the high cost of energy is coming out of the pockets of consumers and small businesses and bolstering the eye-watering profits being made by big oil and gas companies. It takes a political decision to more effectively tax these profits, in order to generate more funds for the Government to support those struggling to pay their energy bills.”
Despite this, the Treasury has insisted that the Government is still there to help, despite the fact the amount of financial support it will provide will be lower.
The spokesperson added: “Extending the scheme at current levels could cost tens of billions of pounds, with costs potentially doubling or tripling if international energy prices increase further than expected. It is vital that taxpayers’ exposure to volatile international energy prices is reduced.
“However, the Chancellor also heard the concerns of the business community who are facing high energy prices and explained that any future support, while at a lower level, would be designed to help them transition to the new higher price environment and avoid a cliff edge in support.”
Currently, the Energy Bill Relief scheme covers all “non-domestic” contracts, including businesses, charities and public sector organisations like schools.
Initially, the Government’s support package for business was set to involve ending support to all firms from April, shifting instead to targeted aid. Previous reports have indicated that shown Chancellor is ditching this tactic because it would have been difficult to classify which firms would qualify for extra Government assistance.
Instead, Mr Hunt looks set to offer lower levels of support, but to all businesses. But following the meeting, it appears that the business leaders were not given all the details about the full extent of support they will be provided after March.
Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said following the talks: “Small firms are still very much in the dark on whether they’ll continue to be supported on energy bills when the current Energy Bill Relief Scheme (EBRS) expires in March.
“We made it clear in our meeting with the Chancellor today that we can’t afford a cliff-edge scenario that would see a raft of business failures. The Government must announce energy support plans as soon as soon as Parliament returns next Monday. With the current scheme ending in three months, it’s been impossible for small firms to plan their 2023.”
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This comes after the FSB’s Out in the Cold report, published in September, revealed that the overwhelming majority (96 percent) of small firms are still concerned about rising energy bills. Meanwhile, nearly two-thirds (63 percent) of all small firms warned their energy costs have gone up from the amount they were paying last year.
The manufacturing sector has been one of the hardest due to the energy intensity of the industry, and fears that slashed Government support could be damaging.
Rob Flello, chief executive of the British Ceramic Confederation, said: “While we welcomed the government’s non-domestic energy bill relief scheme as a lifeline, their announcement of a review sparked concern. We warned that if Government support was downgraded, then this industry would be on a cliff edge. The Government must not leave us in a precarious position.”
A Treasury Spokesperson has previously told Express.co.uk: “We are protecting businesses from high energy costs this winter, caused by Putin’s invasion of Ukraine, through the six-month £18 billion Energy Bill Relief Scheme. However, this is very expensive, and we need to ensure longer-term affordability and value for money for the taxpayer.
“That is why we are currently carrying out a review with the aim of reducing the public finances’ exposure to volatile international energy prices from April 2023. We will announce the outcome of this review in the New Year to ensure businesses have sufficient certainty about future support before the current scheme ends in March 2023.”
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