British households are set to receive £200 each in energy rebates to help reduce the impact of soaring bills, the government has announced.
The Chancellor Rishi Sunak confirmed that it will underwrite the state-backed loans, following mounting pressure on the Prime Minister to address the cost of living crisis.
The so-called “rebate and clawback” scheme will provide a £200 rebate for every household in October, with energy suppliers passing on the money from government loans.
The rebate is aimed at reducing the financial pressure on households when the energy price cap rises in April. However, the loans will be paid back by consumers over the coming years when energy prices fall, and the cost of living crisis has eased. They must start being repaid in £40 annual instalments by April next year.
The energy price cap – which limits how much suppliers can charge consumers for their energy usage – will increase by 54% in April. The cap is set by regulator Ofgem which reviews and updates it every six months to reflect factors such as increases in wholesale energy prices, which have been spiralling over recent months.
The current cap, which runs until the end of March 2022, is £1,277 a year, but will rocket to £1,971 a year for households with typical usage. Find out more in our article What is the energy price cap?
The government is also considering other ways to reduce the financial strain of rising bills for households, such as extending the Warm Home Discount scheme, and council tax rebates and increasing state benefits are also being looked at.