A “significant number” of households in Great Britain received financial support they did not need through the government’s £69bn package to cushion the blow of rising energy bills, the public spending watchdog has said.
A report by the National Audit Office (NAO) said the blanket nature of the financial support meant it helped a “deadweight” of households and businesses that could have afforded to absorb the price rises. It also warned that the speed at which it was distributed left the schemes open to fraud.
The government has provided billions of pounds in household and business support through a string of policies designed to limit the impact of huge increases in energy bills, pushed up by rising gas prices linked to the war in Ukraine.
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The NAO estimates that the support, first introduced last autumn, will cost £69bn, lower than the £139bn first forecast, largely because of a reduction in the cost of the energy price guarantee.
The scheme is designed to limit average annual household bills to £2,500 until April and then £3,000 until April 2024 – although costs are expected to fall below that level from summer. Equivalent support for businesses has been extended and made less generous from April.
The watchdog noted that, like Covid support schemes, the initiatives had been applied “universally and at speed”. The government has faced criticism over the levels of fraud related to Covid help schemes and the Treasury has attempted to claw back more than £5bn that was wrongly claimed.
The NAO report noted that officials in the Department for Business, Energy and Industrial Strategy (BEIS) had only three weeks to implement the household support scheme and less than two months for business support after announcements by the then prime minister, Liz Truss.
The watchdog warned that targeting future support would reduce the cost to the government but make it harder for the business department to verify claims and identify potential fraud.
Gareth Davies, the head of the NAO, said: “Similar to the government’s assistance during Covid, the energy bills support schemes were introduced universally, and at speed, to reduce the impact of soaring energy costs for people and businesses.
“This approach led to compromises – introducing these interventions at speed meant that BEIS has less time to consider fraud and error risks; and their universal nature meant that a significant number of households received financial support they did not need.”
The NAO warned that the energy schemes risked overpaying businesses and flagged that fraud and errors were higher in Northern Ireland as suppliers are subject to different regulatory oversight compared with Great Britain.
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Meg Hillier MP, the chair of the public accounts committee, said: “Today’s NAO report shows that BEIS moved quickly to shield most people and business from soaring energy prices, by introducing universal support schemes. However, it must take steps to better protect taxpayers, now and in the future.
“BEIS will need to juggle protecting citizens and businesses from unacceptable hardship, while managing the risk of fraud and error.”
Separately, the Resolution Foundation said the forecast cost of the energy price guarantee in the next financial year has dropped sharply from £12.8bn to £1.5bn because of falling gas prices. The thinktank noted that, while this will save money for the Treasury, it will also cut about £7bn in tax receipts from energy firms’ profits.
Energy bills will rise from April as a government payment of £400 in support for all households ends. Bills are forecast to reach £3,000 from April but then fall back to £2,200 for the remainder of the year.
A BEIS spokesperson said: “Protecting taxpayers from fraudulent activity remains a priority and we have worked alongside the Public Sector Fraud Authority to manage the potential risks of fraud and a robust approach was put in place.”
