Blow to millions as energy guarantee to be scaled back after just six months
A review will be launched by the Treasury into the guarantee, which was introduced by Liz Truss shortly after she became the Prime Minister.
No details were given on how the guarantee will change but it is likely the help may be more targeted to low-income households rather than a universal support scheme.
Hunt said it will “cost the taxpayer significantly less than planned, while supporting those most in need”.
The Energy Price Guarantee had originally been planned for the next two winters after only coming into effect on 1 October 2022. It sets average bills at £2,500, yet many will pay more than this as it sets a cap on standing charges and unit rates, not bills.
It was brought in to help millions of households who were facing 80% energy price hikes to £3,549, from £1,971, meaning billpayers would save around £1,000.
‘No government help to fall back on’
Laura Suter, head of personal finance at AJ Bell, said: “Scrapping all but six months of the Energy Price Guarantee will send shockwaves through households in the UK, who are once again going to be exposed to soaring energy prices and the prospect of a struggle to pay their bills.
“The indication from Hunt is that help will be targeted at those who need it the most from April onwards, rather than universal support regardless of income. However, there’s no guarantee that the support will be meaningful after April.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The Energy Price Guarantee safety net has been slashed, so it will only be in place until April. It means an awful lot of people who are only just clinging onto their monthly budget with their fingernails will have no government help to fall back on.
“The announcement was one of the few aspects of the mini-budget which was widely welcomed as a vital lifeline to get us through the coming months and years while energy prices are sky high, so the fact it will be withdrawn in April could send millions of household budgets over the edge.”
Coles added that as the government does away with a ‘blank cheque’ on energy bill help, “it means those on average incomes with impossible bills will forced to find hundreds of pounds more each month, with nowhere to turn for help”.
Meanwhile Richard Neudegg, director of regulation at Uswitch, said the government is adding back an “unwelcome element of uncertainty” to households on what will happen come April.
“If a limited pot of help is available, targeting support at those who need it most is a sensible approach. However, there aren’t many households who won’t be worrying about the cost of energy — and this announcement will reignite those concerns.
“The government must address the structural problems of the wholesale energy market as a matter of urgency, including ensuring that consumers benefit from the lower price of energy generated by renewables. Without it, we will continue in this vicious circle of uncertainty.”
‘A new approach’ to the energy market
In a statement Hunt said: “The biggest single expense in the growth plan was the Energy Price Guarantee.
“This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change.
“But beyond that, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.
“So I am announcing today a Treasury-led review into how we support energy bills beyond April next year.
“The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.”
Hunt added that the new approach “will better incentivise energy efficiency”.
The new Chancellor also confirmed that almost all the tax measures from the recent growth plan would be reversed. This includes axing the planned 1p cut to the basic income tax rate and scrapping the alcohol duty freeze.