Energy bills hit the roof
For millions of households across the country, today’s dreaded price cap announcement has confirmed their worst fears.
The average household bill will soar to a record £3,549 a year at the start of October when the energy price cap hike kicks in. This is an 80 per cent rise on the current cap of £1,971 and means the typical energy bill will be over £2,000 higher than the same time last year.
This astronomical rise is “a full-blown economic crisis for thousands of families,” Save the Children said today. It is forecast to leave over 50 per cent of the UK in fuel poverty this winter, defined as spending over 10 per cent of income on energy.
To make matters worse, there is no end in sight. If Vladimir Putin continues to weaponise gas, energy analyst Cornwall Insight is warning that the price cap could hit nearly £5,400 in January, and £6,600 in April. That would be a £550-a-month bill. Today’s announcement, it added, should “act as a wake-up call to policymakers.”
Back in May, ministers unveiled a package of support which includes a £400 bill discount for every household this winter and a further £650 for eight million households in receipt of benefits. But things have escalated considerably since then; this support was announced when bills were expected to hit £2,800 in October.
The Labour Party has proposed the most radical solution to the crisis so far. Keir Starmer is touting his “fully funded” plan to freeze bills at their current level for six months, saving households £1,000 this winter.
Chancellor Nadhim Zahawi has dismissed Starmer’s proposals but insisted today that the government is “working up options” to tackle the crisis ahead of 5 September, so that Boris Johnson’s successor will have the tools to “hit the ground running.”
How confident can we be that this will happen?
So far, Rishi Sunak has pledged to scrap VAT on energy bills and provide additional “direct support” to those on the lowest incomes – around a third of workers – and to pensioners. But he is yet to lay out any details on just how generous this additional support would be. It’s probably academic – the betting markets put his odds of becoming PM at 6 per cent.
Liz Truss, meanwhile, appears to be reconsidering her “no handouts” policy. Previously, critics argued that Truss’s solutions of tax cuts and scrapping green levies on energy bills would do little to help people on the lowest incomes. Now she is hinting that she would provide targeted support to the most vulnerable.
Writing in the Daily Mail, Truss has pledged to take “decisive action on entering No.10 to provide immediate support” to struggling households. We won’t have any more concrete details on this “decisive action” for another week and a half – it wouldn’t be right to announce it until the leadership contest is over, she insists.
What is clear though, is that we are heading towards a winter of discontent.
Interestingly, results from a new Focaldata poll reveal that almost half of Brits – 47 per cent – blame the government more than fuel firms for the skyrocketing household bills. Combatting the cost-of-living crisis is set to be the defining challenge of our next Prime Minister’s time in Number 10.