Terms of Reference: Review of the Energy Bill Relief Scheme
Updated 17 November 2022
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Context
The government has taken decisive action to support UK businesses and other non-domestic energy users including charities and public sector organisations through the Energy Bill Relief Scheme. This scheme ensured businesses were protected from soaring energy costs and provided them with the certainty they needed to plan this winter.
The scheme was put in place for six months, and the government has committed to a review of future support beyond 31 March 2023. On 17 October 2022, the Chancellor announced that this review would be led by HM Treasury. We will publish the findings of this review by the end of the year.
The prospect of continued exposure of the public finances to volatility in the price of energy on an open-ended basis has implications for fiscal sustainability. It is not sustainable for government to continue supporting large numbers of businesses. The government recognises that some businesses, such as those which are highly exposed to energy prices and unable to pass through or absorb these costs sufficiently, may continue to require support beyond March 2023. However, the overall scale of support the government can offer will be significantly lower, and targeted at those most affected to ensure fiscal sustainability and value for money for the taxpayer.
Objectives
HM Treasury are conducting a review into the operation of the Energy Bill Relief Scheme, with the objective of:
• Significantly reducing the overall burden on the taxpayer/public finances, taking into account the government’s commitment to fiscal responsibility and the need to ensure value for money
• Ensuring support is targeted at those most in need and unable to adjust or absorb to recent energy price rises, without creating a category of businesses that rely on indefinite state support
• Ensuring any support provided is consistent with business being incentivised to increase the efficiency of their energy consumption
To ensure fiscal responsibility and value for money for the taxpayer, there will be a very high bar for firms to receive continued government support. Businesses should use the significant support provided over the initial 6 months of the scheme to identify measures that protect themselves from the impact of high energy costs. This should include taking steps to improve energy efficiency and adapting operating models to a higher energy price environment where possible.
Approach
The work of the review is focused on the following areas:
• The effectiveness of the scheme in supporting vulnerable non-domestic customers
• Which groups of non-domestic customers (by sector, size, geography or other factors) remain particularly vulnerable to energy price rises, considering the latest price position and forward curves, alongside other cost pressures
• What barriers exist to these businesses absorbing increased energy costs or passing them through, and their ability to take steps to adjust to higher prices
• An assessment of wider factors, including the economic and public policy rationale for any support
• The most appropriate mechanism to support these customers – whether extending the existing scheme for some users, or replacing it with a different scheme
To achieve this, the review will consider:
• Prevailing economic conditions and the anticipated costs of support
• Evidence from businesses, suppliers, and market experts, which is being collated by the Department for Business, Energy, and Industrial Strategy
• Wider international evidence and lessons learned from interventions being made in neighbouring countries
Scope
Public sector organisations will not be eligible for support through the review. The review will however consider private sector firms which are providers of public services and voluntary sector organisations such as charities.
Governance, Engagement and Timetable
The review is being conducted by HM Treasury, with close engagement with BEIS, other government departments, and the Devolved Administrations.
Decisions on continuing support for businesses will be announced by 31 December 2022.