Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Deferred
Provide analysis of policy impacts on businesses and prevent a financial cliff edge after March 2023.
Conclusion
HM Treasury and the Department do not fully understand the pressures the non-domestic sector will face when the EBRS ends in March 2023, or the potential risk of insolvencies. Many organisations are suffering financially from the aftermath of the pandemic and this has been exacerbated by recent high energy prices. The Department wanted the EBRS to achieve economic benefits, but it risks undermining this if its decision to withdraw support results in increased insolvencies. From April 2023, support for the non-domestic sector will reduce significantly when the Department replaces the EBRS with the Energy Bills Discount Scheme (EBDS) if energy prices remain high. While gas prices have recently fallen significantly from the record-high levels last year, some non-domestic consumers will not feel the benefit if they are trapped in fixed tariffs that were set in late- summer 2022. Additional financial support for energy bills is available for Energy and Trade Intensive Industries, but not for other sectors that can have high energy usage, such as the hospitality sector. HM Treasury expects that other changes from April 2023, such as reduction in business rates, will offset reductions in energy bills support for these sectors. The challenges of the non-domestic sector dealing with rising energy bills has exposed the lack of regulation and visibility that Ofgem and the Department have over the way non-domestic energy market operates. Recommendation 4a: The Treasury should, in parallel to its Treasury Minute response, provide details of its analysis of how the changes to business rates, taxes and energy support will affect businesses across different sectors, and outline how Energy bills support 7 it will ensure that businesses will not face a financial cliff edge after March 2023. It must also monitor and report on the effectiveness of the additional financial support made available to Energy and Trade Intensive Industries in ensuring the resilience of those industries. Rec
Government Response Summary
The government agrees but deflects, stating the department will use findings from Ofgem’s non-domestic market review to inform future actions, with further details to be set out in the summer and plans to be taken forward by Autumn 2023, rather than the Treasury providing an immediate analysis.
Government Response
Deferred
HM Government
Deferred
The government agrees with the Committee’s recommendation. department will use the findings from Ofgem’s non-domestic market review to inform if any areas of the non-domestic market are not functioning appropriately. If any recommendations point to the need for government action, including making any changes to Ofgem’s remit, then the department will consider these carefully and plan for how these would be taken forward by Autumn 2023. Given the need for careful consideration of any actions needed, this does not align with the timings of the progression of the Energy Security Bill. Within the Powering Up Britain publication, the government set out how the department will take forward targeted reforms aimed at making the retail market work better for consumers, become more resilient and investable, and support the transformation of the energy system. Further detail on this will be set out in the summer.