About 3.5 million of the UK’s richest households will receive the government’s £100 energy payment this winter, while nearly 700,000 of the poorest will get nothing, according to new analysis.
Households in the top fifth of incomes will receive £350m, or 14% of the funding, according to the Resolution Foundation think tank, which carried out the analysis with the Independent.
At the same time, about 700,000 households in the poorest fifth, home to 1.64 million people, will miss out. Across the bottom half of incomes, about 1.4 million households will not receive the payment.
The Household Energy Payment, announced in last month’s Budget, will be applied automatically to the bills of more than 20 million households in council tax bands A to D from January, at a cost of about £2.5bn.
The problem lies in the decision to link the payment to council tax bands. In England and Scotland, bands are still based on property values from 1991, so they don’t reflect three decades of house price rises in London and other cities.
In England, a home worth up to £40,000 in 1991 is in band A, and one worth up to £88,000 is in band D, even if it is now worth well over £1m. Its owners still qualify for the £100.
Some areas have seen especially steep rises. In Hackney, east London, average values have increased by 796% since the mid-1990s, from £68,264 to £611,648. Waltham Forest, Brighton and Bristol have all seen rises of about 700%.
Meanwhile, many low-income households live in homes in higher bands, or in bands that don’t match their income, so they miss out.
Alex Clegg, an economist at the Resolution Foundation, said families faced a tough winter, with the energy price cap forecast to rise above £2,100 in January, and fresh support was “sorely needed”.
But he said flat £100 payments to four in five households “completely misses the mark”, and called the £350m going to the richest fifth “a complete waste of money”. He said the government had had “ample time” to design a scheme targeting families on low incomes with high energy needs.
Daisy Cooper, the Liberal Democrats’ Treasury spokesperson, called the support “too timid and not well targeted”. She said using the council tax system had created “an absurd situation” in which low-income households lose out while wealthy households that have retired early and downsized benefit.
Some experts had urged ministers to expand the Warm Home Discount instead. It already pays an automatic £150 a year to households on certain benefits, including Universal Credit.
Government sources said council tax bands were chosen because they were the quickest way to get money to a large number of households this winter. Official estimates suggest the payment will reach 88% of low-income households, meaning 12% will miss out.
A government spokesperson said tackling the affordability crisis was its priority, and that it had “acted quickly to give families immediate breathing space”.
The spokesperson said most low-income households would receive the £100 from January, that £100m was being given to councils to support other groups, and that about six million low-income households would also receive the £150 Warm Home Discount this winter.
The Welsh Government has set out a £130m package that extends the payment beyond council tax bands.
About one million households in bands A to D in Wales will receive the £100, as in England. Wales will also pay it to anyone eligible for the Council Tax Reduction Scheme, which helps people on low incomes and certain benefits, whatever their band.
Up to 20,000 “off-grid” homes that rely on heating oil or LPG and qualify for council tax reduction will be able to get an extra £250, from a £5m fund. Those households were left out of the Budget’s help with energy costs, which focused on gas and electricity bills.
The package also includes £8m for councils to extend the £100 to households facing hardship that other schemes miss, with details due soon, and £7m for bus operators to help with fuel costs and keep fares down.
Deputy First Minister Sioned Williams said it was “a challenging time for many households across Wales”. She added: “While we are taking firm action wherever we can, we need the UK Government to play its part.”
Who gets what
- England: households in council tax bands A to D get £100 off their energy bills automatically from January. You don’t need to apply. You can check your council tax band online.
- Wales: the same £100 for bands A to D, plus anyone eligible for council tax reduction in any band. Off-grid households on council tax reduction can also get £250.
- Missing out? Councils in England are sharing £100m to help groups the payment misses, so contact your local council if you’re struggling. Households on certain benefits may also qualify for the £150 Warm Home Discount.