Martin Lewis has explained how the £200 energy bill loan offered by the UK Government actually works. The initiative was announced in February to help households with the rising cost of living.
But there has been lots of confusion about the loan, which the founder of MoneySavingExpert.com has debunked. The financial guru explained that in October households in Wales, England and Scotland will either have their bill reduced by £200, or will be given a bill credit. Those on prepay will pay it through their smart meters or you will be given a voucher or cheque, he said.
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"It is not optional and it is going to happen automatically on every single bill. Then from the following April, and for five years after that, you will then have your bill automatically – without choice – increased by £40 a year," Martin said on the money-saving site.
"The best way to think of it is as a form of energy bill levy. We already have levies on energy bills, we all pay a part of our bill which goes towards green infrastructure, whether you have green energy or not. A part of our bill goes towards funding the cost of moving customers whose firm has gone bust to a supplier of last resort. That is a levy added to our bill."
So, in October £200 will be taken off bills and then each April after that, they will add a £40 'levy' back on for five years to recoup the cost. But Martin told readers to be aware that this isn't the same as a personal loan or borrowed money that individuals pay back - even if you didn't get the £200, you will still pay that extra £40 for the next five years. You can get more money news and other story updates by subscribing to our newsletters here.
He explained: "This isn't about, you borrowed money, you pay it back. So if you're living at home with parents and you move out in two years' time, even though you didn't get the £200, your bill will still be £40 higher – every household will be charged £40 more. You'll simply get your energy bill and it will be higher because of this levy and the one this October will be lower. There's no sort of loan account to an individual or even to a household. It's more a negative levy than a positive levy."
