The Office for National Statistics has concluded its classification review of the Energy Bills Discount Scheme (EBDS) for non-domestic customers in the context of international statistical guidance. This followed the scheme's announcement by the UK Government on 9 January 2023 and as published in our Forward Work Plan on 28 February 2023. The payments under this scheme are classified as subsidies on products, paid by central government to the energy suppliers in the non-financial corporations sector in the UK.
The classification decision has implications for producer price inflation. This is because the EBDS influences the prices that non-domestic customers are charged for units of gas and electricity, as it is a subsidy on products paid by central government to energy suppliers. It is these reduced unit prices that will be used in compiling the input Producer Price Index (PPI). The input PPI measures the cost of raw materials used in production, which will now be lower than if the EBDS had not been introduced.
Under the EBDS, the UK Government specifies a price reduction to be applied per unit of gas and electricity consumed. The discount is applied if wholesale prices are above a certain price threshold. The UK Government fully compensates energy suppliers for the savings delivered to non-domestic customers. These payments will apply for twelve months, beginning on 1 April 2023.
Decisions on whether to include rebates, subsidies and discounts in our inflation statistics are taken on a case-by-case basis, aiming to be consistent with the National Accounts, the Public Sector Finances, and other economic statistics. They are based on international statistical guidance and practical considerations.
If you require any further information on these classification assessments, please email econstats.classifications@ons.gov.uk. If you require more information on the classification review's implications for inflation statistics, please email business.prices@ons.gov.uk for PPI queries.