Executive summary

The cost-of-living crisis has been an incredibly difficult time for millions of households, with many seeing their budgets stretched to breaking point and beyond. At Citizens Advice, we’ve seen a huge shift in the number of people needing crisis support and coming to us with budgets which even our expert advisers can’t balance. This crisis exposed the patchwork nature of support, available both through the welfare system and also through bills support schemes aimed at helping those on the lowest incomes access essential services.

Inflation has fallen since its double-digit peaks - but household budgets remain on a knife edge. Half of households in Great Britain cut back on two or more essential services in the past year - and over 1 in 7 cut back on at least one essential to the point where it impacted their daily lives. This impact falls disproportionately on households with the lowest incomes.

This lack of financial resilience is bad for families, making it harder for households to absorb unexpected shocks. It’s also bad for businesses as it leads to higher levels of debt needing to be written off. This all comes at a time when we know huge levels of investment are needed across markets to transition to Net Zero, improve our water and sewerage systems, and expand internet connectivity. This will all put further pressure on bills at a time when many can least afford it - unless there are mechanisms in place to shield those on the lowest incomes.

This report sets out these challenges - and how we can navigate our way to a solution. Our focus is on the role that targeted bill support - i.e. social tariffs - can play in providing a buffer for households on the lowest incomes. This would ensure that they can access essential services at an affordable price and protect them from both predictable price rises and those, like we have seen in recent years, which are less predictable. The report looks at the current patchwork of support which exists across four markets: energy, water, broadband and motor insurance. These services are essential for day-to-day life, but we've seen more and more people struggling to access them without making sacrifices. We've found that targeted bill support isn't working as effectively as it should be:

Energy support needs to be more generous and better targeted to address the historically high energy bills which households continue to face.

Water social tariffs, which are set by individual companies, vary significantly both in terms of who is eligible and what they receive - leading to an unfair postcode lottery.

Broadband social tariffs suffer from persistently low levels of uptake, with only 5% of eligible households signed up.

Motor insurance lacks any form of bill support scheme.

These are problems worth solving. We estimate that £1.9billion of support goes unclaimed in water and broadband alone. As we set out in the report, these schemes have developed independently of each other - and there's a lack of strategic thinking about how they fit together. This means that good practices set up in some sectors - such as the automation of the Warm Home Discount in England and Wales - haven’t been applied to other sectors. This has also led to a complex landscape of support where it's difficult for consumers to understand what they're eligible for and how to access it.

Key recommendations

Our recommendations for actions the government can take now to improve the support currently on offer:

1. Expand the Warm Homes Discount and move from a flat discount to a tiered discount depending on the needs of different households.

2. Water and broadband providers must do more to proactively contact customers to offer them a social tariff, aided by proactive data sharing from DWP to utility companies to ensure suppliers know who to contact.

3. Start the process of ending postcode lotteries in broadband and water support by using existing powers available to Defra and DSIT:

Water - Defra has powers under the Flood and Water Management Act 2010 to set guidance for suppliers on how their social tariffs should work. As an essential first step towards standardisation, this power should be used to set out a single approach to eligibility.

Broadband - the Communication Act 2003 gives DSIT the power to direct Ofcom to report on how a mandatory social tariff, common across all providers, should be structured and funded. This should be triggered immediately.

About the project

This report is the start of a collaborative project between Citizens Advice, the Institute for Public Policy Research and Policy in Practice, funded by abrdn Financial Fairness Trust. The project aims to set out the need for social tariffs, the problems with current schemes, how bill support schemes can be better designed and, critically, how any scheme can be practically implemented across the four key markets we're focusing on.