Policy paper

CFP response to the consultation on expanding the Warm Home Discount Scheme, 2025 to 2026

Published 17 April 2025

Applies to England, Scotland and Wales

The Committee on Fuel Poverty (the Committee) is an advisory Non-Departmental Public Body sponsored by the Department for Energy Security and Net Zero (DESNZ). The Committee advises on the effectiveness of policies aimed at reducing fuel poverty and encourages greater co-ordination across the organisations working to reduce fuel poverty.

The Committee welcomes the opportunity to comment on DESNZ’s open consultation expanding the Warm Home Discount Scheme, 2025 to 2026. As energy bills remain higher than before the surge in global energy prices, affordability for many households still remains a challenge. It is therefore a good opportunity to review how many more households could benefit from expanding the Warm Homes Discount (WHD) Scheme for Winter 2025 to 2026 prior to the scheme expiring in March 2026. Our comments are limited to the areas which align most closely with the Committee’s remit.

Proposals for increasing eligibility in England and Wales

Removal of the ‘high cost to heat’ eligibility criteria

The consultation proposes the removal of the ‘high cost to heat’ eligibility criteria in England and Wales, having the effect of expanding the scheme to provide households in receipt of means tested benefits (MTBs) with a £150 rebate off a relevant energy bill.

The proposed expansion focuses support to those on the lowest incomes and most at risk of falling into fuel poverty. Based on DESNZ modelling, this would increase the overall WHD coverage of fuel poor households from around 30% of total households in fuel poverty to around 45%. In addition, 45% of households whose energy costs make up more than 10% of their income after housing would be covered – up from 25% under the current scheme.

Under the current WHD scheme there are 1.3 million fuel poor WHD recipients but under the proposals for 2025 to 2026 1.8 million fuel poor households could be reached. The proposed change will mean that fuel poor households are a smaller percentage of the number total of WHD recipients. However, the Committee welcomes the larger number of fuel poor households who will receive WHD and that expanding the scheme will offer support to an estimated additional 2.7 million households making around 6.1 million in total for winter 2025 to 2026. Within that extended cohort we expect more low-income households with children will benefit from WHD, an outcome the Committee welcomes.

Impact on Scheme Costs

The WHD scheme is funded by energy bill payers and the consultation acknowledges that based on estimated 6.1 million recipients, with the rebate held at £150 it would cost the average dual fuel billpayer around £37, an increase of £15 on the current scheme. This means that the net benefit to households already in receipt of the discount could be reduced, because all households pay the levy cost regardless of whether they are recipients of the discount. This in turn means that the net rebate received by these households would be around £15 lower if the high-cost threshold is removed.

The consultation suggests this would be mitigated by further reductions in the bill through other means such as reductions in operating costs or debt allowances. The Committee would welcome further clarity, commitment and certainty to realise this to offset the additional cost of WHD 2025 to 2026.

Increasing the spending envelope in Scotland

The Committee recognises the proposals for Scotland as a sensible measure.

Expanding the Park Homes Scheme

The Committee supports the proposal to apply the current mechanism used for park homes to be used for other households who do not have a direct relationship with an obligated energy supplier.

Additional Comments

This consultation runs in parallel with consultations on the Review of the Fuel Poverty Strategy and Improving the energy performance of privately rented homes, from which the conclusions and decisions of government can have a far-reaching impact on ending fuel poverty and supporting households in fuel distress.

Fuel poverty is all too real for many households. They share characteristics which place them in a pool of similar people. They are on a lower income and possibly dependent on benefits. They will mainly live in some of the oldest housing in the UK, or a rural property. They will be paying more than some of their neighbours just to heat a similar size home, simply because they live in a cold home. And they will almost certainly be in debt to their energy company and possibly owe money elsewhere too. They may also be adversely affected by health conditions and disabilities which require a greater amount of energy consumption to keep warm.

The drivers of fuel poverty are well known: the combination of low household income, energy prices and how well insulated the house is.

Alongside effective energy efficiency programmes for fuel poor cold homes, some form of additional financial support for energy bills will continue to be needed, whether in the form of WHD or discounted energy tariff.

The WHD proposals for Winter 2025 to 2026 may provide some evidence and stronger indication of what form future energy financial support should take.

Currently Fuel Poverty under the LILEE measure identifies those households who live in properties rated D, E, F or G and their disposable income (income after housing costs and energy costs) would be below the poverty line. The LILEE measure does make adjustments for those in receipt of Warm Home Discount, a person in receipt of the WHD payment living in a D rated property may not be regarded as fuel poor. With respect to Warm Home Discount, the payment is considered to have the effect, at the margins, of lifting a small proportion of residents in an EPC D-rated property to a C rated home. Should WHD continue beyond 2026 the Committee questions the validity of this assumption.

We know too that many households living in a C rated property struggle to afford their energy bills and/or are in arrears; this potentially creates a false impression that fuel distress cannot occur among these households, which by many other definitions would be deemed to be fuel poor.

Cold homes, whether through poor energy efficiency or unaffordable bills, do not need to be a permanent feature of a modern advanced society like ours. Neither does fuel poverty.