Good news for households as report suggests energy bills will rise by £600 less than feared
- Average household will pay £2,400, down from the £3,000 that was forecasted
- The drop follows months of falling wholesale gas prices due to milder weather
- It will lead to £11.3bn saving for Treasury, fuelling calls for cut to the budget
Energy bills will rise by less than feared from April in a boost for families and the Treasury, a report suggests.
The average household will pay £2,400 in 2023-24, down from the £3,000 forecast by the Government last autumn, according to the Resolution Foundation.
The drop follows months of falling wholesale gas prices due to mild weather and European countries cutting their dependence on Russian imports. It will lead to an £11.3billion saving for the Treasury, fuelling calls for Chancellor Jeremy Hunt to cut taxes in next month’s Budget.
When Mr Hunt set out his tax plans in November, wholesale gas prices were still significantly higher than normal. It meant the Government’s energy price guarantee – which capped average household bills at £2,500, rising to £3,000 in April – would cost £12.8billion. But wholesale gas prices have fallen more than 70 per cent from their August peak, meaning the scheme will now cost only £1.5billion.
The Resolution Foundation report said falling prices would mean lower tax receipts from energy producers and generators, which would cost the Treasury £7billion. But lower prices will also mean people spend more, boosting tax receipts elsewhere.
The drop follows months of falling wholesale gas prices due to mild weather and European countries cutting their dependence on Russian imports. It will lead to an £11.3billion saving for the Treasury, fuelling calls for Chancellor Jeremy Hunt to cut taxes in next month’s Budget
Emily Fry, an economist at the think-tank, said: ‘The cost of living crisis is far from over, but falling gas prices mean that it’s looking less bleak than just a few months ago.
‘This will bring real benefits to families, even if it might not feel like it for some time to come. While energy bills are still set to rise next year by another £400, we’re not on course to see the sustained £3,000 annual bills many feared.’
Conservative MP Sir John Redwood said ‘of course’ the huge saving adds to the argument for tax cuts in next month’s budget.
A separate report by the UK’s public spending watchdog estimates the overall cost to the Treasury of support for energy bills will be £69billion.
The National Audit Office calculated the cost of guarantees and one-off payments for households as well as the price cap for businesses.
It said because the schemes were rolled out ‘at speed’, they presented risks around value for money by supporting homes and businesses that may not need it.
NAO head Gareth Davies said: ‘The energy bills support schemes were introduced universally, and at speed.
‘Introducing these interventions at speed meant that the Department for Business and Energy has less time to consider fraud risks; and their universal nature meant a number of households received financial support they did not need.’