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'£50 average savings' off fuel bills - but at what price?

George OsborneChancellor George Osborne has found the money for £50 average savings on energy bills. But if it didn't come from down the back of the sofa, where exactly did it come from?

At the beginning of December the government announced a series of measures that it claims will save an average of £50 on household energy bills. This came in the wake of a string of planned price increases by energy companies, with some bills set to rise by over 10% in 2014. Also trumpeted was a £1000 rebate on stamp duty for people buying a new home - to spend on energy efficiency measures. So good news, then? Well, any adjustments to bills will depend on what price hikes are already in the pipeline, and bills are unlikely to go down, just not increase by as much. And of course, other costs, such as wholesale energy prices, could rise in the meantime.

At what cost?

But where has the government managed to find this money to ease the burden of energy bills in the short term, and what implications will it have for the various schemes to improve the energy efficiency of the nation's housing stock? The bulk of the cash will come from a 33% cut in the amount energy companies have to pay for the ECO energy efficiency programme, particularly the part of it intended to fund solid wall insulation. One estimate reckons the number of such installations will fall from 80,000 to 25,000 per year. The government claims this will provide a saving of £30-35 per household, and to make up the £50 figure it is to chip in with a rebate said to save the 'average customer' £12 on their bill for the next two years.

'Bad news'

Criticism of these policies has come from several sources. For instance, Paul King, chief executive of the UK Green Building Council, said 'this is bad news for people who cannot afford to heat their homes, especially if they live in solid-walled properties.' Similarly, Adam Scorer, director of the consumer watchdog Consumer Futures, commented that '...this [price reduction] has come at a cost. Consumers need long term solutions to energy affordability. The most sustainable way is through the provision of energy efficiency measures.'

Package of other measures

Various other initiatives were included in this package, claimed to offset the carbon cost of cutting ECO funding, projected to be 2.7 to 2.9 million tonnes of carbon dioxide. These include:

  • District heating schemes to be eligible for ECO funding.
  • Energy suppliers to be allowed once more to include easy-to-treat cavity wall and loft insulations towards their ECO targets - presumably to make up the loss of the solid wall measures.
  • Support from Green Deal funding is to be specifically aimed at landlords to encourage them to bring rented properties up to scratch ahead of the introduction of compulsory standards in 2018.
  • Energy efficiency of public buildings to be given a £90 million boost.
  • Green Deal Communities fund to be increased from £20 to £80.