Concern energy bills plan 'does not go far enough' and could lead to 'a cliff-edge' after six months

The new prime minister Liz Truss has set out plans in the House of Commons to cap the average price of energy bills for households to £2,500 a year for two years from October, and for businesses for six months under a 'new energy price guarantee.'

This will also apply to other non-domestic energy users, including charities and public sector organisations like schools. 

The business secretary will carry out a review after three months, and this may be extended for certain industries and vulnerable businesses

While the announcement would give early years settings ‘a little breathing space over the coming months’, Neil Leitch, CEO of the Early Years Alliance, said it would ‘do very little to ease their worries over the long-term.’ 

He said, ‘It’s clear that the government has failed to understand the immense pressure that businesses, including those in the early years sector, are under. For nurseries, pre-schools and childminding settings, years of underfunding and sharply rising inflation, alongside current energy cost increases, have pushed many settings to the brink and, on the basis of the information that we have so far, today’s announcement simply does not go far enough.’ 

Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said, ‘The energy support for businesses announced today is absolutely necessary and will assist childcare providers, but we need to see the detail on how it will work in practice. However, they need support for longer than six months to avoid a cliff edge in early spring. 

‘Other costs that early years settings face are going up at a much faster rate than Government funding rates, which are still too low for the most nurseries to remain sustainable. Nurseries are working hard to minimise fee increases to parents that are already struggling with their own household bills.’ 

Kevin Courtney, joint general secretary of the National Education Union, said, ‘The Government’s announcement that they will freeze energy prices for schools and colleges for six months will do nothing to mitigate the increases that have already happened. Many schools have already seen their energy bills triple or more. The proposal only provides six-month protection at an unmanageably high level and does not provide security for the future. 

‘School funding remains lower in real terms than it was in 2010. The sharp increase in school costs means that the last Prime Minister’s promise to restore school funding will not be met unless funding is increased.

‘The Government must step up to protect children’s education now. Schools are striving to recover from the pandemic and the rise in the cost of energy and the chronic lack of funding will derail that work.’  

Martin McTague, national chair of the Federation of Small Businesses, said the support would be ‘a huge relief’ for millions of small businesses but was ‘sparse on detail’ and left many questions unanswered, such as whether businesses would be able to renegotiate their bills down, and what would happen to businesses which are typically quoted a cost for 12 months – for example, does that new quote include 6 months at a low rate and 6 months at a high uncapped rate? 

He added, ‘This must not result in a cliff-edge after six months, with the withdrawal of support to all but “vulnerable” targeted industries, sectors or types of business. The definition of who falls in and out of that support will need to be looked at carefully at the three-month review. 

‘Our work on vulnerability of small businesses to energy costs has revealed huge bills causing damage in virtually any sector that uses energy in any meaningful way, just like most households. Any future definition of ‘vulnerable industries’ will need to be broad, realistic and fair.

Families

While charities welcomed the help for families, they said it did not go far enough to address other ‘rocketing’ costs, such as food, fuel and housing.

Imran Hussain, director of policy and campaigns at Action for Children, said, ‘This is a big intervention with a big hole in it. Fixing the cap is welcome and much needed, but the sums still won’t add up for low-income families who despite this help will continue to face bills far beyond what they can afford. This crisis isn’t just about energy; food, fuel and housing costs have also rocketed, forcing many families to ration even the basics.

‘This package should’ve thrown more of a lifeline to the families who need it most. We desperately need more targeted help through benefits for the low paid and those who have lost their jobs or cannot work because of disability, illness or caring responsibilities. Even with a freeze, energy bills will still be double what they were a year ago, the price of other essentials continues to soar, and the true value of benefits has been cut.’

Hannah Aldridge, head of policy at the Child Poverty Action Group, said, ‘The energy price guarantee is a welcome first step but more is needed to keep struggling families afloat through a crisis that will last well beyond this winter. Government support cannot stop at energy costs – the price of food alone has risen by 12.7 per cent this year and the poorest cannot cut back anymore.

'The government must immediately and permanently increase benefits to match inflation.  Without that, families on the lowest incomes will be unable to cope in the price storm coming towards them – with devastating consequences for the children in those households.’

Mark Russell, chief executive at The Children’s Society, said, ‘This announcement falls far short of what is needed for low-income families who are in desperate need of additional targeted support.

‘Our teams across the country see families already struggling to pay bills and feed their children. 

‘Under these plans, the typical household will still face a further £500 increase in their annual energy bill, meaning they will pay twice what they were paying around this time last year.

‘We are worried sick about the devastating conditions families and children will face over the coming months if they don’t get this extra support. 

'We passionately believe every child has a right to live in a secure, warm home with food on the table, but we fear many children will be left cold and hungry this winter as their families are plunged into debt and homelessness.’