Subsidising household energy bills has cost the UK almost £40bn since October, the government has revealed.
Preventing households from being hit with the worst of energy price rises has been the most costly scheme of its kind in UK history, the government announced, racking up a £39.3bn tag between October and March.
£21bn was spent on the Energy Price Guarantee, which saw the government subsidise payments to energy companies above an average of £2,500 per household.
£12bn was directed to the £400-per-house Energy Bills Support Scheme meanwhile, with £5.5bn and £0.9bn spent on the Bill Relief Scheme and other programmes respectively.
Since the schemes’ introduction in October, the government has effectively paid the difference between the average £2,500 limit, which varies on usage, and Ofgem’s price cap – designed to set a price on the amount suppliers can charge per unit of energy.
“This helped safeguard jobs and livelihoods, and enabled many families to heat their homes,” energy security secretary Grant Schapps said.
Prompted in the wake of the pandemic and war in Ukraine, the energy crisis culminated in gas prices, which determine other fuel costs, soaring over 450% between August 2021 and 2022.
As a result of higher prices, British Gas owner Centrica PLC (LSE:CNA) penned tripling profits to £3.3bn in 2022 while another FTSE 100 constituent, SSE PLC (LSE:SSE), saw pre-tax earnings up 89% at £2.2bn.
Part of the funding for the schemes will come from the windfall taxes on North Sea and other UK energy producers, according to the government, with these expected to raise £26bn by 2028.
Come July, Ofgem’s cap will fall to £2,074, below the government’s now-raised guarantee price of £3,000, meaning energy bills to suppliers will no longer be subsidised.
Critics have argued that the UK’s energy market lacks competition though, with MoneySavingExpert’s Martin Lewis urging last month that “change” be implemented in the sector.