Chancellor says bosses energy bill scheme ‘unsustainably expensive’

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Chancellor Jeremy Hunt has told business leaders that the current level of energy bill subsidies for companies is “unsustainably expensive” and a reduced subsidy scheme will be announced next week.

Mr Hunt met the heads of business groups including the Confederation of British Industry (CBI), the Institute of Directors (IoD) and UKH Hospitality earlier on Wednesday afternoon.

The meeting followed calls from industry for urgent clarification after the government delayed outlining details that were originally due to be provided before the new year.

The Treasury revealed in a statement next week that the government will determine the outcome of its review of the current subsidy scheme in the House of Commons.

The current energy bill relief plan, which sets wholesale energy prices for electricity and gas at about half the expected market price, expires in March.

The Treasury said: “The government has shielded businesses this winter from these high energy costs with an £18 billion energy bill relief scheme – one of the most generous support packages in Europe.”

However, no government can permanently protect companies from this energy price shock.

“The chancellor has been clear that this level of support is unsustainably expensive and that the current scheme has always been time-limited to six months.”

It claimed that extending the scheme in its current form could “cost tens of billions of pounds” depending on wholesale energy prices.

The chancellor heard concerns from business leaders about the current pressure from rising energy prices during the meeting.

The Treasury added that Mr Hunt had told the chiefs that a “lower level” of additional support would be “designed to help them transition into the new higher price environment and avoid a support brink”.

Households have already been told their bills will be capped until April 2024, albeit at a higher rate than the current £2,500 annual cost, while businesses have been kept in the dark.

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The revised scheme is expected to provide bills assistance for another year, to March 2024.

Hunt had promised to give companies certainty about future plans for support by the new year, saying last month that an announcement would come just before or after Christmas.

Mr Hunt said in his fall budget in November that the government would have to direct support only to the most vulnerable industries and would likely have to cut the aid they receive as well.

Business groups have criticized the plans, warning of job losses and business failure if blanket subsidies are withdrawn.

While continued aid to businesses is set to be welcomed, there are concerns about a drastic cut to subsidies.

On Wednesday, the IOD urged the government to provide targeted support in its plan next week after the meeting.

Alex Hall-Chen, Principal Policy Adviser on Sustainability, Skills and Employment at IOD, said: “The Energy Bill Relief Scheme has been a critical intervention, as our research shows it has removed significant risk to about a quarter of businesses this winter.

Businesses will be reassured that support will continue in some form for another 12 months.

However, it is a shame that the government has not found a way to target subsidies to those sectors of the economy that are particularly vulnerable to volatile international energy markets.

“This means that the most vulnerable companies will lose support at a critical time compared to what they were this winter.”

The British Beer and Pub Association (BBPA), which was also at the meeting, said pubs may have to close without help close to current levels.

The Foundation’s chief executive, Emma McClarkin, commented: “We met with the Chancellor today to underscore the challenges facing the industry and the critical importance of expanding energy relief support to avoid major business failures and the closure of many pubs and breweries.”

Without expanded support close to current levels, pubs and breweries in communities across the country could be lost forever.

“Failure to protect pubs and breweries from price hikes in April will be the last straw for companies that have been struggling for three years to remain fulfilling in serving their communities.”

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