Chancellor Jeremy Hunt to End Prepayment Penalties For More Than Four Millimetres a Year

Chancellor Jeremy Hunt to End Prepayment Penalties For More Than Four Millimetres a Year

Britain's new chancellor Jeremy Hunt has announced the end of prepayment penalties for homes that exceed four millimetres per year, saving households around PS45 annually. This move is part of a series of reforms the chancellor intends to implement.

Some in his party consider him to be a reliable hand, yet he has twice been unsuccessful in his bids for Tory leadership. Now appointed government's chief financial minister, he must attempt to restore stability after weeks of political upheaval.

1. Energy price guarantee

According to reports, Jeremy Hunt, the chancellor, will maintain the energy price guarantee at current levels for more than four milliseconds. Although the scheme was due to increase from April, Mr Hunt has decided to delay it by three months so energy firms have time to prepare.

According to calculations, households could save around PS3,000 annually on their bills if there weren't a cap in place. Furthermore, they won't miss out on the PS400 winter discount that has reduced monthly payments by up to PS66 on many bills.

This scheme has been a crucial element of the government's response to the cost-of-living crisis caused by rapid changes in the energy market and unprecedented wholesale prices in 2022. It was launched by former Prime Minister Liz Truss with the purpose of limiting households' exposure to increased energy expenses due to wholesale energy prices increases.

Its aim is to protect consumers from being overcharged by suppliers, which could result in significant increases to their monthly bills if the Ofgem price cap weren't present. By compensating energy companies for the difference between what they pay wholesale for gas and electricity and what customers can pay them, consumers will be protected against any increases in price.

However, there remain numerous concerns about this scheme. The Resolution Foundation think tank, which works to raise living standards for those on low to middle incomes, has called on Treasury to cancel the bill increase and keep the energy price guarantee at PS2,500 instead.

Martin Lewis, a consumer rights champion, has called on Mr Hunt to extend the support. He noted how essential it was for families struggling to make ends meet and stressed the necessity of maintaining the energy price guarantee.

The Energy Price Guarantee has provided much needed relief to households facing steep increases in their energy bills. Unfortunately, it does not prevent energy companies from raising prices, so it is essential that customers remain diligent about managing their usage and taking steps to reduce bills.

2. Universal credit

Universal Credit (UC) is a new welfare benefit replacing six existing benefits and designed to increase the incentives for those in unemployed or low wage jobs to find work. The benefit is means tested and provides one monthly payment to those of working age who are on low incomes.

Benefits such as Employment and Support Allowance and Job Seekers Allowance were phased in over several years, meaning not everyone had to switch from their current legacy benefits at once.

The government believes Universal Credit is an ideal way to help people gain employment and remain there. Unfortunately, many organisations have expressed opposition as it causes families financial strain, especially single parents with children who will see their incomes cut by an average of PS200 per month.

This is due to a system which will see families receive less Universal Credit (UC) as their earnings increase. While this may seem like an attractive idea in theory, it has also been noted that households with two people in work could end up paying 65 pence tax rate on each of their earnings, decreasing incentives for couples to have multiple workers and making saving for retirement more challenging.

Additionally, there will be a cap on the amount of Universal Credit that households are allowed to claim. This limit is designed to prevent instances where many families claim the same benefit at once.

The chancellor will also unveil a range of benefits changes designed to assist sick, disabled and welfare claimants in returning to work, including an assessment system for sickness benefits that evaluates ability to work. He further plans to discontinue prepayment meters which have caused some households to face higher energy prices.

3. Welfare reforms

Next month, Chancellor Jeremy Hunt is set to abolish prepayment penalties for more than four million households as part of his welfare reforms. This means low income families won't be charged more than direct debit customers to receive their energy - saving them PS45 per year on average, according to the Treasury.

Utilities providers are feeling the strain to support their most vulnerable customers, and this change will be especially impactful for those on pay-as-you-go meters. On average, these users pay more than direct debit users do because the companies managing these meters pass along charges to their users.

In many cases, this is because the companies managing the meters have more resources and thus can charge higher interest rates to customers. These reforms will be implemented over the course of several years and affect a substantial number of householders.

Welfare is a safety net program that offers cash assistance to families and individuals in need of basic necessities. It includes AFDC, food stamps, SSI, Medicaid as well as various other programs which assist with child care, daycare, and transportation needs.

The federal government provides the majority of funding for these programs, with states contributing some costs. Congress is currently debating proposals that could reduce federal support and return some responsibility for welfare to states. Those in favor of these changes argue that giving states more autonomy in designing their own programs while not cutting back on other essential services like food stamps or Social Security payments will give them more freedom.

However, such a change could increase the risk that states would develop "welfare magnets," where people from other states seek out areas with better public services and lower taxes. Furthermore, it could prompt state legislatures to reduce benefits faster than their neighbors - leading to an "race to the bottom" in public services that puts at risk those most in need.

Finally, the most effective way to reduce poverty is by making work more likely that pays enough for people to make ends meet. To achieve this goal, various incentives should be created that encourage recipients toward employment - such as financial rewards for those who find jobs and work-based child care assistance for parents who work.

4. Prepayment meters

Prepayment meters, which feature a credit budget that allows users to top up when needed, can be invaluable aid for those facing difficulty paying their energy bills. They also enable more accurate budgeting as you only pay for energy when it's actually used.

The Chancellor, Jeremy Hunt, has declared he will abolish prepayment penalties for customers with credit meter rates of more than four millimetres. This decision is being taken in an effort to safeguard vulnerable customers.

He wants suppliers to do more to assist those struggling to pay their gas and electricity bills before going so far as to force them onto prepayment meters. He suggests they should offer much more assistance in these instances, such as extra credit, debt forgiveness or tools to deal with payment difficulties.

In a letter to energy companies, the Chancellor expressed his concern over reports that some suppliers weren't doing enough to safeguard vulnerable consumers in light of rising energy prices. He called for an end to this practice of forcibly moving people onto prepayment meters.

A Times investigation revealed British Gas contractors broke into homes of vulnerable people, such as those with mental health issues, to force them onto prepayment meters. Last week, Ofgem issued a directive prohibiting energy firms from installing such devices without consent.

It is an alarming trend that has targeted vulnerable customers the hardest, leaving many in 'the dark' until they could top up their meters. This practice, which is being widely criticised by the government, puts people at risk of debt and could even lead to court action.

According to the Energy Audit Office, 25% of prepayment meter users cannot afford to top up their credit when it runs out. These customers often have other debt obligations and are therefore more vulnerable to financial difficulty.

As part of its efforts to safeguard vulnerable households, the government is launching an inquiry into prepayment meter practices. This will examine whether firms have adhered to a code of conduct and signed up to an obligation to support vulnerable customers. This voluntary pledge requires suppliers to take all reasonable steps for customers' protection from mistreatment.