Rishi Sunak today will help families to pay their rising power bills, but he warns that he can’t fully protect them from the cost of living crises.
Regulators will reveal this morning that the energy price cap is to rise by around £650, taking the average household bill to nearly £2,000.
At the same time, the Bank of England is set to raise interest rates for the second month running, meaning higher mortgage payments for many homeowners.
Sources in government said that the Chancellor will today announce a multibillion-pound package for helping to ease the financial impact on families struggling.
It is expected to involve a temporary rebate on all bills of around £200 – together with additional help for low-income households that could be worth an extra £300.
But this will not be enough to fully offset the devastating energy price hike – particularly as millions are about to face a rise in national insurance, council tax and other household bills.
According to The Times, the Chancellor will also give homeowners millions of dollars in rebates on council taxes bills to reduce the effects of the surge in energy prices.
He will likely announce rebates for council tax bands A through C, that are funded by grants from the government. These could be of benefit to up to 15,000,000 households.
Pictured: Rishi Sunak (Chancellor) will announce a multibillion-pound package that will help ease the financial burden of struggling families due to the high cost of living.
Sources suggested that other options to slash bills, including scrapping VAT on fuel and cutting green levies, had been rejected – a decision that is likely to anger some Tory MPs.
Sunak will present his plans to the Commons today, then address the nation at a Downing Street press event later.
According to a Treasury source, however, last night’s statement indicated that the Chancellor would admit that the Government was unable to offset the rising cost of living. The source stated that ‘we cannot cover all costs’. “We simply have to ensure that the assistance we provide is targeted and as effective as possible.”
You can also find other developments here:
- Boris Johnson pledged to continue with controversial national insurance increases in April.
- Official data confirmed that half of the income available to the most vulnerable was being wiped out by rising food, energy and transport costs.
- CBI warns that Britain is in “trap” of high taxes and low growth.
- In the Commons, Sir Keir starmer and Mr Johnson fought over the cost to live;
- Ministers were warned by Sir Tony Radakin, Defence Chief of the Army that Russia’s invasion in Ukraine could drive up prices.
- Downing Street was concerned about a plot to overthrow Mr Johnson after a number of Tory MPs made public calls for Johnson’s resignation.
The first move today will come from energy regulator Ofgem, which is expected to announce that the energy price cap will soar from £1,277 to more than £1,900 for the average household – a staggering increase of more than 50 per cent.
Families with larger properties risk even bigger hikes – with some facing an increase of as much as £1,500.
Analysts warn that, on current trends, the price cap will rise again in October to around £2,300.
Boris Johnson and Chancellor Rishi Sunak (pictured) are said to have approved plans for £6billion in state-backed loans to limit the impact of soaring energy prices on household bills
At noon, the Bank of England is set to raise interest rates for the second time in two months, with the base rate increasing to 0.5 per cent – the highest level since March 2020.
Bank of England governor Andrew Bailey is expected to warn that the increase is needed to curb inflation, which rose to 5.4 per cent last month – the highest level for 30 years. Analysts are concerned that more rate increases will be forthcoming.
He will then respond to the questions with his plan, as well as a warning about inflation and promising to control public spending. In the afternoon, Sunak will hold a press conferemnt in Downing Street.
This package will likely be more generous than the headline suggests. The £200 rebate will be funded by government loans to the energy firms worth around £6billion.
Companies will have to pay rebates to customers to get the cash back to them.
However, the suppliers will be required to return the money via a “clawback” levy on bills in the future. This means that consumers will eventually repay any money received this year.
The industry, which proposed the scheme, had initially asked for £20billion in order to spread the entire cost of the price spike over a period of years.
The Treasury did not want to create a precedent by artificially freezing bills for unknowable costs to taxpayers, despite the fact that prices are expected to stay high for at least 2 years.
Second strand will target millions of families who are eligible for means-tested welfare benefits. The Treasury will not reimburse the cost of this assistance. Industry sources suggested this could provide an extra £300 to poorer families. The cost to the Treasury would be £2-£3 billion.
Ministers have discussed a range of options for distributing the cash, including using the existing Warm Homes Discount Scheme, which is worth £140 a year, making Universal Credit more generous, or giving a council tax rebate to homes in bands A to C. The Treasury declined to say which option the Chancellor had chosen.
Independent surveys have found that many families are faced with the dilemma of choosing between heating and dining.
According to the Resolution Foundation, April could be a cost of living disaster as taxes and energy costs rise dramatically overnight.
This is at a moment when the world’s gas price spike has been causing hardship for oil and gas companies like BP and Shell. Labour has called for a tax on windfalls.
Research by Age UK suggests older people who are struggling with the cost of heating will need at least £500 in support to stay warm and keep the lights on.
Caroline Abrahams spoke out, saying that there are many older Americans who fear not being able heat their homes. This should cause shameful statements from the Government.
“Millions upon millions of people in the UK fear the price caps announcement.”
‘Everyday we hear heart-breaking stories of elderly persons who must choose between heating or eating. It’s not a crisis that is imminent, but it’s here. Millions upon millions of elderly people are experiencing pain.
As mortgage interest rates rise, homeowners should be prepared for rate shocks. This could lead to a squeeze on your living costs.
If interest rates increase to 0.5% today, millions of homeowners will face severe mortgage bill increases.
Analysts believe that an increase in base rate is almost certain as pressure mounts on the Bank of England to control inflation.
It would mark the second increase in seven weeks after the base rates climbed from 0.1% to 0.25 % in December, a new record.
The analysts warned this could just be the start, with markets now predicting a level of 1.5 per cent by the end of the year – the highest in more than a decade.
If interest rates reach 0.5 percent today, millions of homeowners will face a steep increase in their mortgage bills (stock photo).
Any rise would affect approximately two million homeowners with variable-rate mortgages.
If the base rate increases to 0.5 per cent, it would cost borrowers with a typical £150,000 loan an extra £21 a month, or £252 a year, according to figures from broker L&C.
At 1.25 per cent, they would pay an extra £84 a month or £1,008 a year. And if it rose to 1.5 per cent, they would pay £106 more each month or £1,272 a year.
Rate rises will hit larger loan borrowers even more.
Someone with a £450,000 mortgage would pay an extra £744 a year at 0.5 per cent, and £3,804 more at 1.5 per cent.
A rise in mortgage rates would cause major problems for homeowners already struggling with rising energy costs and tax hikes this April.
According to AJ Bell investment firm, ten millions people have not seen their base rates rise above 1% during adulthood.
Fixed-rate mortgage customers will see their monthly payments remain the same until the end of their term.
However, fixed loans for new customers are now more expensive because lenders have priced in anticipated rate rises.
Experts strongly advised that borrowers lock in their rates now, as they are low by historical standards. This will help to prevent future shocks.
David Hollingworth of L&C said: ‘Although mortgage rates have been on the rise in recent months there are still highly competitive fixed rates on offer.
“These deals can be used to protect mortgage payments and reduce homeowner’s largest outgoings, when their other expenses rise. However, the best deals are not going to last forever.
AJ Bell stated that the market was pricing in a 95% chance for an interest rate increase to 0.5 percent today.
Laith Khalaf, the Bank’s spokesperson, stated that a rate increase at its February meeting was almost inked in. This would mark the first time in four years since 2004, when the Bank has increased interest rates in consecutive meetings.
“But, this wouldn’t have been the first time that markets get ahead of themselves.”