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The Default Tariff Cap

The Default Tariff Cap, set independently of Government by the gas and electricity regulator Ofgem, sets a limit on the unit price of gas and electricity for households on default tariffs in Great Britain.

On 3 February, Ofgem announced the Default Tariff Cap will rise by 54% from 1 April 2022. (The cap is also known as the energy price cap. We refer to it as the default tariff cap in this briefing.)

Energy Bills Rebate

On the same day, the Chancellor of the Exchequer announced an Energy Bills Rebate to protect households from rising energy costs, as well as an expansion of the Warm Homes Discount Scheme. The Energy Bills Rebate will include:

Energy Bill Discount Scheme

  • All domestic electricity customers in Great Britain will receive “an upfront discount on their bills worth £200” this autumn. It is not clear from the Government’s statements whether it will be possible to opt out of the discount.
  • The £200 will be recovered from bills in £40 instalments each year for five years, starting in the financial year 2023/2024. It is expected to be added to the standing charge on bills.
  • The Department for Business, Energy and Industrial Strategy will set out more detail on the Energy Bill Discount Scheme in a consultation spring 2022.

Council Tax Rebate

  • A £150 non-repayable council tax rebate for all households that are liable for council tax in bands A to D in England. This is expected to benefit 80% of homes in England. The rebate will be made directly by local authorities from April.
  • Local authorities will be given £144 million of discretionary funding to support those who need help with energy bills but who are not eligible for the council tax rebate.
  • The Department for Levelling Up, Housing and Communities and local authorities will set out further information on the council tax rebate.

The devolved administrations will receive around £715 million funding through the Barnett formula to provide comparable support where the UK Government support doesn’t cover Scotland, Wales or Northern Ireland.

The Government’s press release and factsheet on the energy bills rebate provide more information on the energy bills discount and the council tax rebate.

Further reading

The Library briefings  The energy price crunch and Energy bills and tariff caps provide more information on the background to rising energy prices, and on the development of the Default Tariff Cap.

The Library will publish updates to both of these briefing papers in due course.

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