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Martin Lewis urges Rishi Sunak to ‘urgently rethink’ £200 ‘discount and clawback’

The £200 payment will be automatically given to all eligible UK households in October. However, research commissioned by MoneySavingExpert.com has found the majority of British adults would opt out of the Government’s new compulsory £200 energy ‘loan-not-loan’ scheme, if given the choice.

Martin Lewis, founder of MoneySavingExpert.com said: “I would ask the Chancellor to urgently rethink his energy bills £200 discount and clawback scheme. Bills are already sky-high, and on April 1 we now know most will rise by a previously unthinkable, and for many unaffordable, 54 percent.

“And sadly, when that ends in October, it currently looks possible the price cap will rise by another 20 percent. That will leave most people paying double what they were a year ago.

“With this scheme, the Chancellor is effectively taking a worrying gamble with people’s finances. He is following the market’s view that rates will finally start falling later this year, meaning the price cap will fall in April 2023. Therefore, he hopes the impact of this scheme will mean lower bills now and in the future as the extra costs then will be covered by the drop in bills.

“That is far from certain, especially with the escalating conflict between Russia and Ukraine. And crucially, if rates don’t drop – or don’t drop a lot – people will be left in a lose-lose situation, with far higher bills than now and an additional levy on top.”

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Fifty-seven percent of those responsible for energy bills who took part in a nationally representative poll of 1,665 adults in Great Britain by YouGov for the website said they would decline the cash for the scheme the Chancellor calls an ‘energy rebate’.

The findings show in every single category of age and income – including those receiving benefits – the majority would opt out.

Just a quarter said they would actively opt into the scheme if they had the choice. The rest weren’t sure.

The results come after Chancellor Rishi Sunak announced last week that all electricity bills – including prepayment – in England, Scotland and Wales, would be reduced by a flat £200 in October.

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Then, from the following April, all electricity bills will be increased by a flat £40 a year for five years.

The nature of the scheme means billpayers cannot opt out – it will impact every electricity bill regardless of choice.

Mr Lewis continued: “Our poll plainly shows most people aren’t willing to take this gamble. They don’t want to be a part of it – yet it is unavoidable.

“The state forcing people to do something against their will that is potentially damaging to their finances isn’t a good outcome.

“So, as I doubt it is technically possible to set up an opt-out scheme by October, in truth the best route for most is likely to scrap this scheme and come up with an alternative solution.”

There is much confusion about the scheme. While it may feel like a loan, and the Chancellor called it a rebate, the money saving expert believes it is in fact neither. He has coined it a ‘loan-not-loan’.

Martin Lewis explained that there are two elements involved.

He said: “There are two elements to the loan-not-loan.”
1. In around October 2022: Every electricity bill will be reduced by a flat £200. There is no choice – people can’t opt out. Prepay users will get the money via their smart meter, voucher, cheque or similar.

He continued: “For those with small bills, the flat £200 will have a big impact; for those with big bills, a little one.”

2. From April 2023: Every electricity bill will have a £40 a year levy added to it, and that will happen for five years to effectively repay the initial discount.

He added: “And in a reverse to October, for those with small bills, the flat £40 will have a bigger impact than for those with big bills.

“While many are calling this a loan, it isn’t. It’s automatic, not optional.

“It isn’t linked to individuals or households or buildings, it’s about bills. You have to take it if you pay for electricity this year. You have to pay extra for it if you pay for electricity in future. It’s not regulated via the Financial Conduct Authority. It doesn’t go on your credit file.

“It’s an energy levy (like the green infrastructure levy added to bills). First there’s a negative levy reducing bills, then a levy added to them. While for people whose home-situation doesn’t change it will feel like a £200 loan repaid at £40 a year, for others there are bizarre outcomes – e.g:

  • “Losers: Five people share a house in Oct then separate. They get one £200 discount off their bill. They then all move out and live alone. From the following April all five of them will have bills £40/year higher. Similar for those moving out of parents’ houses in the five years.

  • “Winners: Two singles live alone in Oct, then meet. They each get a £200 a year discount, then they move in together, so they’ve only one bill, and it’ll just have one £40 a year added.”

Express.co.uk has contacted the HM Treasury asking for comment.

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