The government’s support schemes to protect people and businesses from soaring energy prices were “undoubtedly successful”, Whitehall’s spending watchdog has said.
The previous government introduced eight different support schemes for households and businesses – including the Energy Price Guarantee – in 2022 and 2023 after Covid-19 and Russia’s invasion of Ukraine caused average annual household bills to increase from £1,277 in the winter of 2021/22 to more than £4,000 by the start of 2023.
The National Audit Office (NAO) said the government deserved credit for working quickly to introduce the schemes.
The government acted quickly to provide tens of billions of pounds of support to help protect people and businesses from soaring energy price rises with relatively low levels of fraud and error
But the NAO found “moving at speed” meant the government had to accept risks to value for money and providing universal support meant some people received financial assistance they did not need.
The support cost £44 billion – two-thirds lower than the original estimate of £139 billion, in part thanks to lower-than-expected wholesale energy prices and a warmer-than-average winter in 2022, the NAO’s report said.
The Department for Energy Security and Net Zero (DESNZ) reported that the schemes successfully prevented around 289,000 households in England from going into fuel poverty while fewer people chose to disconnect or ration their energy use, the NAO found.
DESNZ should be commended for its quick responses and for its efforts to prevent fraud and error in the schemes
But DESNZ estimated that despite government support around 238,000 households fell into fuel poverty between 2022 and 2023.
Although the government quickly distributed financial support to most households there was low take-up among harder-to-reach groups such as people living on boats.
For households without a direct relationship with an electricity supplier take-up was around one-fifth of DESNZ’s provisional estimate of potentially eligible recipients, according to the report.
DESNZ was taking steps to understand what it could have done to improve take-up while considering how a range of interventions might help mitigate the risks of a future energy crisis.
The schemes suffered a comparatively low rate of fraud and error, which DESNZ estimated at 0.7% of payments – worth £291.8 million of the programme’s total expenditure.
The NAO found that the government’s understanding of energy use among the commercial sector was “poor” during implementation of the schemes, which led to identical support for all businesses despite differences in their energy consumption compared with domestic households.
Gareth Davies, head of the NAO, said: “The government acted quickly to provide tens of billions of pounds of support to help protect people and businesses from soaring energy price rises, with relatively low levels of fraud and error.
“DESNZ needs to prepare for future energy price spikes and understand how any potential future interventions can be provided in a way that maximises value for money.
“This work is at an early stage of development and it is not clear how DESNZ will respond in reality.”
The energy price spikes following Russia’s invasion of Ukraine exposed Britain’s dependence on volatile fossil fuels and fuelled the cost-of-living crisis
Geoffrey Clifton-Brown, chairman of the Committee of Public Accounts, said: “The government’s rollout of £44 billion of support during the energy crisis succeeded in shielding many households from hardship and keeping businesses open.
“DESNZ should be commended for its quick responses and for its efforts to prevent fraud and error in the schemes.
“Two years on from the start of this energy crisis, DESNZ’s work to support consumers should there be a surge in energy prices in the future is at an early stage.
“DESNZ needs to act now on the lessons it has learned so it can be on the front foot for the next crisis.”
A DESNZ spokesman said: “The energy price spikes following Russia’s invasion of Ukraine exposed Britain’s dependence on volatile fossil fuels and fuelled the cost-of-living crisis.
“The only way to achieve energy independence, protect billpayers and reduce imports is to invest in clean, homegrown power controlled in Britain.
“That’s why we’re getting on with delivering our mission for clean power by 2030.
“We will also do everything possible to support vulnerable families this winter, including through the £150 Warm Home Discount, which is expected to support three million households.”
