Britons brace for 80% HIKE in energy bills when October price cap is announced TOMORROW
Britons are bracing for an 80 per cent hike in energy bills to be announced tomorrow when the autumn price cap is revealed, with forecasts predicting average costs could increase to more than £3,500.
It is expected that some people could pay almost double for their gas and electricity from October 1, with energy regulator Ofgem set to reveal the amount suppliers can charge households on Friday, with one think tank saying bills could be ‘says could be ‘a serious threat to families’ physical and financial health this winter’.
An analysis by Cornwall Insight predicts average costs will increase to £3,554 in October and £4,650 in January – a massive jump from today’s £1,971, which is already a record, and much higher than £1,138 last winter.
Experts are calling for a 1 per cent increase on income tax to help pay for energy bill reductions for the UK’s poorest households amid warnings the country faces a ‘catastrophe’ this winter without intervention.
An independent think tank has said millions of households are faced with ‘totally unmanageable’ increase in gas and electricity bills, with people expecting to pay around double for their energy this winter than at the same time last year.
The Resolution Foundation is calling for a 30 per cent reduction in energy bills for people on benefits and households where no one earns more than £25,000, with smaller reductions for those where no one earns more than £40,000.
Suppliers have attempted to step up their support of those hit hardest by the price increases, with British Gas pledging to use 10 per cent of its profits to help its worst-hit customers.
Chris O’Shea, chief of executive of Centrica, which owns the company, has pledged to donate £12million this autumn, and said that grants of up to £750 would be available for customers.
The Government has already pledged to £30billion to help households struggling with soaring energy bills, which have been driven up surging gas prices caused by the war in Ukraine and has contributed to levels of inflation not seen in decades.
One minister has said there is ‘no question’ there will be a ‘further package of support measures’ to deal with the cost of living crisis, although what form this takes could depend on who becomes the next Prime Minister, with Rishi Sunak and Liz Truss offering different solutions.
Analysts are warning people will face an 80% increase in gas and electricity bills this autumn, with Ofgem set to announce the October price cap tomorrow. There are concerns prices could go higher than £6,500 next summer
UK gas prices are soaring after Russia began throttling off supplies to Europe, causing a global shortage as EU leaders scramble for supplies
An report by independent think tank Resolution Foundation has said people in energy inefficient homes will face the largest energy bills. The graph above, from the report, shows people in the most inefficient homes could see gas bills of almost £600 for the month of January alone
Greg Jackson, founder of Octopus Energy has said if the price of beer kept up with gas inflation, it would cost £25 for a pint. This is the price of what everyday goods would be if they had increased by the same rate as gas prices over the last year
In a report published this week, the Resolution Foundation said none of the plans in place at the moment are enough to help those threatened with fuel poverty this winter.
The foundation, which aims to improve the standard of living for people on low or middle incomes, said the country is facing a ‘catastrophe’ and the ‘explosion that we are now on course for will be totally unmanageable for millions of households’.
It called on the new Prime Minister – whether that be Mr Sunak or Ms Truss – to ‘introduce radical new policy support ‘ to prevent the energy crisis ‘becoming a serious threat to families’ physical and financial health this winter’.
The think tank said energy bill freezes and solidarity taxes, or social tariffs costing billions would be needed to help families who ‘simply don’t have’ the money to pay bills which are around £2,000 more than this time last year.
It said the £30billion that has already been pledged is not enough, and has called for a 30 per cent bill reduction for people on benefits or with no one in the household earning more than £25,000.
It also wants smaller reductions for homes with no one earning over £40,000, saying all three of these changes put in place would cost £15.4billion but would help 94 per cent of the poorest households.
The foundation said this could be offset by a ‘solidarity tax’ rise of 1 per cent on all income tax rates, which would raise £9.5billion, 60 per cent of which would be paid by the fifth wealthiest households.
It said this would be an improvement on policies suggest by Mr Sunak, Ms Truss and opposition parties.
The report – titled ‘A Chilling Crisis’ – says Ms Truss’ plans to reverse a rise National Insurance contributions and implement tax cuts ‘are largely irrelevant to the problem facing the country this winter’.
It said reversing the recent NI rise would see ‘twice as much of the benefit go to the top twentieth as the entire bottom half’, adding would raise incomes in London by twice as much as some other regions, despite energy bills rising across the country.
The foundation said that Mr Sunak’s plan to give targeted payments to people on benefits ‘would make a major difference this winter’, saying that ‘there is a strong case’ for his plans to give a second round of £650 Cost of Living payments to 7.3million households on means tested benefits.
But it said this policy would create a ‘very large cliff edge’ where people not on benefits or earning just over the cut off amount end up missing out on £1,300 of support.
It added this payment also wouldn’t be enough to cover the expected increase in bills.
The report said the price cap freeze suggested by Labour would ‘have a large impact’, but said it would be ‘very expensive’, costing £36billion this winter, and potentially a further £64billion if continued through next winter.
It added the scheme would ‘give marginally more help to richer than poorer households and blunt incentives that we would be more worried about for higher income households to reduce consumption’.
Britain’s ‘energy crisis hotspots’: Friends of the Earth have revealed how badly different areas in England and Wales will be affected by the October Ofgem price cap rise, that is expected to be £3,554-a-year for every household
The price of petrol and energy bills has risen dramatically over the last year as inflation in the UK breaks through 13 per cent
The big five oil companies – Shell, BP, Chevron, Exxon and TotalEnergies – made record profits of nearly $60billion last year
Jonny Marshall, Senior Economist at the Resolution Foundation, said: ‘A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain.
‘We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and build up unmanageable arrears.
‘The new Prime Minister will need to think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most.
‘Significant additional support should be targeted at those most exposed to rising bills and least able to cope with them, and be watertight so that no-one falls through the cracks.
‘But none of the proposals from the leadership candidates or the opposition parties currently do this.
‘An innovative social tariff could provide broader targeted support but involves huge delivery challenges, while freezing the price cap gives too much away to those least in need.
‘This problem could be overcome with a solidary tax on high earners – an unthinkable policy in the context of the leadership debates, but a practical solution to the reality facing families this winter.’
One Government minister has said he believes there will be a ‘further package of support measures’ to deal with the cost of living crisis and energy bills once a new Prime Minister is in place.
No immediate extra help will be announced by Boris Johnson’s Government, with major financial decisions being postponed until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.
Will Quince told Tom Swarbrick on LBC radio: ‘There is no question in my mind whatsoever, both listening to the two leadership candidates but also just looking at our economy, and also the challenges that people and businesses are facing up and down this country driven by Putin’s barbaric invasion and occupation of Ukraine, that the Government is going to act and put in place a further package of support measures.
‘Now, we will have to wait a couple of weeks for a new prime minister to set out their agenda alongside a new chancellor, but both leadership contenders have been clear there will be a fiscal event and more help will be coming.’
Energy watchdog Ofgem, which has been criticised over its handling of the crisis, is set to announce another huge rise to its price cap tomorrow, which will come into effect on October 1.
Analyst Cornwall Insight now predicting average costs will increase to £3,554 in October and £4,650 in January – a massive jump from today’s £1,971, which is already a record, and much higher than £1,138 last winter.
On Thursday, Which? warned the Government to raise its energy bills discount by at least 150% or risk pushing millions of households into financial distress.
The consumer watchdog said the Government’s financial support for all households must increase from the current £400 to £1,000 – or from £67 to £167 per month from October to March.
The existing support package is inadequate to protect living standards for those on the lowest incomes, it said.
When the Government first announced its financial support package in May, the energy price cap was predicted to reach around £2,800 in October.
On Wednesday, Chancellor Nadhim Zahawi insisted ‘nothing is off the table’ when it comes to action on soaring energy bills, but added that a freeze in the price cap would not deliver ‘targeted help’ for those who need it most.
In the meantime, the boss of British Gas has said it will give 10 per cent of energy profits to its poorest customers.
Chris O’Shea, chief of executive of Centrica, which owns British Gas, has pledged to donate £12million this autumn, and said that grants of up to £750 would be available for customers.
Centrica boss Chris O’Shea announced measures to help struggling families this autumn after company’s profits soared
He added that a further 10 per cent of profits would be donated every six months until the energy crisis resolves itself.
The promise could see as much as £60million made available for the company’s poorest customers and is the first promise of its kind to be made by an energy firm.
Mr O’Shea told the Sun that ‘many people are facing really tough choices’.
He said: ‘We don’t have a silver bullet and we know this fund can’t reach everyone. But I believe it can help make a real difference for those who really need our support.’
The grants of between £250 and £750 will be targeted to the tens of thousands of customers British Gas has identified will be in financial distress as a result of soaring energy costs.
Mr O’Shea, who has headed Centrica since 2018 and earns £875,000 per year, revealed on July 28 that operating half-year profits at the firm had risen five fold to £1.34billion.
Centrica’s bumper profits for the six months to the end of June far outpaced the £262m recorded in the same period last year.
The firm, which produces energy as well as selling it to households and businesses, announced it would restart its dividend at 1p per share after suspending it for three years – sparking a backlash from critics.
The £12million offered to help customers is less than one per cent of Centrica’s group profits, according to the Sun.
Mr O’Shea blamed regulator Ofgem for not being able to lower customers’ bills.
He told the newspaper: ‘Under the current system our regulator Ofgem sets the price you pay for energy to make sure everyone pays a fair price that reflects the actual cost of energy.
‘If an energy supplier decided to charge below that cap, they will lose money quickly and will go out of business.
‘We’ve already seen that if you don’t have robust and resilient energy companies then consumers pay the price – each and every household in the UK is forking out £100 more this year on energy bills to pay for the collapse of multiple energy companies last year and this can’t be allowed to happen again.’
Operating half-year profits at British Gas (file photo) parent company Centrica, rose five fold to £1.34bn. The company has pledged to use some profits to help customers with energy bills
Consumer Price Index (CPI) inflation, which is the increase in how much people pay for goods and services, is set to reach 18 per cent in the new year
The headline CPI rate reached 10.1 per cent in July – well above analysts’ predictions of 9.8 per cent. It was up from 9.4 per cent the previous month
It comes as inflation hits double figures for the first time in 40 years, the highest it’s been since 1982, at 10.1 per cent.
Surging energy prices will be the key factor in driving inflation to 18.6 per cent – the highest level for nearly half a century – in January, according to financial services firm Citi.
It says inflation of the Consumer Price Index (CPI) inflation – which indicates the increase in the amount people pay for goods and services – will soar past the 13 per cent which the Bank of England previously said would be the peak in October, instead hitting the highest level since 1975 in the new year.
Now, an estimated 45 million people will struggle to pay energy bills this winter with predicted rises in price cap.
The new study, by the University of York, shows that 18 million families will be left trying to make ends meet after further predicted rises in the energy price cap in October and January.
The energy price cap is forecast to rise above £3,600 for the average household from the start of October.
It could then top £5,000 in January, and rise above £6,000 in April, according to the latest forecasts.
Even with the support that has already been announced, the four million households in the UK with pre-payment meters will be spending around 44 per cent of their monthly disposable income on bills during the depths of winter.
Thousands of people could see their power cut off if they are unable to pay for it up front, while millions of direct debit customers could fall behind on their bills and shred their credit ratings.
The number of families falling behind on at least one utility bill increased from 9 per cent in October 2021 to 14 per cent in June.
