The government's household and energy relief plans could put large amounts of public money at risk, Department for Business, Energy and Industrial Strategy permanent secretary Sarah Munby has warned.
Munby has requested a ministerial direction for each of the two flagship energy relief schemes announced under Liz Truss. Letters to the now-ex business secretary Jacob Rees-Mogg sought his go-ahead for the Energy Price Guarantee and Energy Bill Relief Scheme, warning of the “very large” amounts of public money at risk.
Munby said the schemes would provide “vital support” to people across the UK and thousands of businesses and were "necessary and urgent" but their scale and speed would "pose risks".
Rees-Mogg instructed officials to proceed with both schemes, saying he “recognised” why Munby could not provide full assurance over the schemes, adding that the department “must nevertheless proceed to implement” them.
The EPG is a price cap which will limit the amount an average household pays on gas and electricity bills, while the EBRS provides businesses with energy bills relief. The EPG was initially a two-year scheme but both are now set to last for six months and will be reviewed so ministers can consider what further support to provide beyond April.
Perm secs must ask for a written ministerial direction when they believe a proposed policy or programme would breach the Treasury’s Managing Public Money guidance – in this case, concerns over its value for money, deliverability and the risk of fraud.
Costs ‘more obvious’ than benefits
Munby said the benefits of both schemes would be “considerable”, with the household bills help “limiting what would otherwise cause an intolerable rise in fuel poverty and a welfare crisis across the UK” and the business support limiting “the imperil of thousands of businesses”.
But she said much of the intended benefits cannot be straightforwardly quantified, compared to the “very significant and obvious” taxpayer costs.
She said the schemes' success will ultimately depend on their ability to “drive down inflation and push up economic growth” and pointed out that these benefits go “far beyond” her remit.
For the household bills scheme, Munby said she had not been able to carry out a full evaluation of how the scheme would compare to other potential alternatives, because it needed to be developed and implemented quickly. She therefore did not feel able to give full reassurance over the value for money of the scheme, she said.
Munby also raised specific concerns over the business support scheme, warning there would be “significant deadweight” because it is universal and untargeted.
“This is one of the reasons why we have committed to a review to explore a more targeted scheme,” she added.
‘Even small rates of fraud will have significant impact’
Munby said the department has worked alongside the Public Sector Fraud Authority to manage risks of fraud and gaming from both schemes and developed a “robust” approach.
But, due to the scale of the spending, Munby said “even small rates of fraud would have significant impacts to the public purse”.
Munby said she could also not yet give full reassurance on the fraud risks relating to the Northern Ireland version of the household bills scheme. This was because, in Northern Ireland, “the market is regulated in a different way and so we will need to develop bespoke solutions,” she said.
She also pointed out that the department would need to temporarily over-compensate energy suppliers in the early months of the EPG in order to ensure fixed tariff customers receive support “without undue delay”, something the department would have “designed out” if the deadline was less urgent.
The risks of delivering at speed
Munby also flagged concern about whether the two schemes could be delivered on time.
She said BEIS was clear on how it would achieve the EBRS time but there would be some risks from implementing it at speed. For the EPG, she said the department has done “a great deal of work” to ensure the EPG is deliverable in full and “as rapidly as possible”.
To quickly implement the household bills scheme, she said the department was “working in parallel rather than in sequence” – implementing all processes at the same time and going ahead without full enforcement powers under the assumption that parliament will be give consent to the legislation when the government introduces it.
Delay to EPG ministerial direction publication
Munby’s letter on the EPG was written on September 29 but she asked Rees-Mogg to delay its publication until the scheme “was fully established and its publication would not undermine its success in any significant way”. This ended up being a 26-day delay. In contrast, the EBRS exchange of letters occurred on 24 October and was published the following day.
“Although I would normally publish such a letter immediately, on this occasion I would not wish to draw public attention to these matters whilst we finalise contractual arrangements to deliver the scheme, and commence implementation,” Munby said in her request for the EPG ministerial direction.
"It will be essential to maintain the full confidence of the public and our private sector delivery partners during this launch period. I propose to keep the content of this letter and your reply confidential until such point that we are satisfied that the scheme is fully established, and publication would not undermine its success in any significant way. I currently anticipate such a time to be towards the end of 2022.”
Since her letter, Truss has U-turned, limiting the policy to six months, and resigned as PM. New prime minister Rishi Sunak has not yet revealed what help his government plans to offer with energy bills, but has previously committed to fund support through public spending cuts and energy profit levies.