Citizens Advice’s response to DESNZ’s consultation on expanding the Warm Home Discount Scheme, 2025 to 2026
Response to DESNZ’s consultation on expanding the Warm Home Discount Scheme, 2025 to 2026 187 KB
We support the government's proposal to extend support to more low income households. While this is welcome, it is not enough to address the ongoing affordability crisis for those most in need.
In April, the price cap is set to increase to £1,849, which is 79% higher than historic norms. If prices remain at this level over the coming winter, an average household in receipt of WHD would still be paying 65% higher than before the crisis. WHD has failed to keep pace with rising costs - in 2014 when it was introduced the scheme was worth 12.5% of the average bill, but now only makes up just over 8%. For households with higher energy needs, the payment meets an even lower proportion of their costs. Continuing geopolitical instability means that gas prices are likely to remain volatile, and while work is underway to increase energy independence, at the moment the UK remains vulnerable to external price shocks.
A ‘tiered WHD’, which we have previously proposed, is our preferred approach. This could use the existing WHD mechanism to allocate support according to multiple cost thresholds. Households on eligible benefits with costs above the highest threshold would receive a higher payment - with decreasing levels of support for those with lower energy needs. A tiered WHD could be additional to the £150 flat rate payment made to all households, regardless of energy need. The government could also consider a ‘hybrid option’ including higher guaranteed payments to certain groups, such as low-income pensioners or low-income households with children. We explore some of the options available in our recent report: Frozen in Place.
But the government needs to go further. The expiration of the current WHD regulations next year provides the perfect opportunity to reshape the scheme so that it provides the right support to people in need, and is responsive to changes in the future.
The Government’s 2030 Clean Power Action Plan has committed to wide-ranging reforms and investment which should increase energy security and bring prices down for consumers over the longer term. However, it will take some time for the benefits of this action to be realised, and the government risks jeopardising these plans if people aren’t supported during the transition.
Better targeted bill support could also unlock vital reforms to support the transition to net zero and the goals in the Government’s 2030 Clean Power Action Plan. In particular, the mechanism could be adjusted to mitigate the risks for people who might lose out from certain changes. For example, it could work alongside reforms to policy levies that would make electricity cheaper, encouraging the decarbonisation of heat, or by supporting those on low incomes who continue to rely on gas. It could also tackle the distributional impacts that could arise from standing charge reform, which could push bills up for people with higher energy needs.
It can also support people while they wait for energy efficiency improvements to their home. While recent nationally representative polling commissioned by Citizens Advice found that nearly 7 in 10 people (69%) are interested in making energy efficiency improvements, two thirds (66%) said they were concerned about the cost of doing so. To overcome these concerns and make sure energy efficiency is affordable for everyone, the Government should consider a package of financial support as part of its forthcoming Warm Homes Plan.
The overall generosity of the targeted support scheme could be tapered down as the impact of the Warm Homes Plan and cheaper low carbon energy reduces the need for support.
A tiered WHD may not be possible by this winter. If this is the case, the proposed expansion should be the first step towards better long-term targeted support. When the WHD regulations expire in 2026, the government has an opportunity to introduce better long-term targeted support. The most effective approach would be a ‘tiered WHD’, building on the existing mechanism to allocate support based on estimated energy costs