Millions of households face a ‘cliff-edge’ of soaring energy bills next year after Jeremy Hunt drastically cut short the Government’s support scheme from two years to six months.
The new Chancellor said yesterday the scheme, which aims to keep average annual household bills below £2,500 amid soaring energy prices, will be replaced in April.
He instead promised to provide ‘targeted assistance’ to the most vulnerable families. However, analysts have warned the move could see average bills double to more than £5,000 for some households.
Meanwhile, consumer champion Martin Lewis, using figures from Cornwall Insight, forecast energy bills to rise by 73 per cent to around £4,350-a-year for an average household in April.
MoneySavingExpert founder Mr Lewis warned last night that even if the numbers were in the right range, targeted help will be needed to make it through. It is especially important that it remains at these levels until next winter.
Mr Hunt made his announcement amid the reversal of £32billion worth of tax cuts to reassure the markets after the turmoil sparked by last month’s ‘mini-Budget’.
Warning of the return to austerity, he stated that the Government will need to make difficult decisions about how to balance the books.
After Jeremy Hunt dramatically reduced the Government’s assistance scheme by two years, millions of households will be facing a cliff-edge of skyrocketing energy bills in next year.
Analysts have warned average household energy bills could hit between £3,923 and £5,000 next April, according to forecasts. The Government will continue to cap prices at £2,500 until April, but today Jeremy Hunt said the scheme would not continue beyond, with ministers instead opting for ‘targeted’ help for the poorest families
He also spoke in the Commons and refused to rule out increasing windfall tax on profits from oil and natural gas giants to help raise money for the plugging of the financial blackhole.
This would mark a humiliating U-turn by Prime Minister Liz Truss. She had last month rejected the possibility of imposing additional windfall taxes and said it would slow down investment.
M. Hunt said to MPs, “I am not against taxing real windfalls.” There is no way to deny it.
Yesterday, Treasury officials scrambled to create a new price-guarantee scheme that would be feasible for all income levels.
Mr Hunt made the announcement amid the reversal of £32billion worth of tax cuts to reassure the markets after the turmoil sparked by last month’s ‘mini-Budget’
The existing regime was supposed to be in effect for all households until 2024. It will end now in April.
Ofgem is the gas regulator. It has not yet set an April cap amid uncertainty over what will happen with wholesale prices.
However analysists say bills could top £5,000. One consultancy, Auxilione, told the Times that its forecast shows average household bills could hit £5,078 in April.
The Resolution Foundation think-thank predicts the figure could be around £4,000. while banking group Investec put their forecast figure around £3,923.
Meanwhile, The Resolution Foundation estimated curtailed support could save up to £40billion next year (2023-24).
Industry estimates suggested the previous two-year scheme could cost anywhere between £70billion and £140billion, depending on the wholesale price of gas.
Ministers will continue to support the poorest members of society, Mr Hunt said. He stated that the objective was to devise a new strategy which will be significantly more cost-effective than originally planned while still providing enough assistance for people in greatest need.
The Chancellor stated that businesses support will be targeted.
After the announcement, Labour launched an attack on Labour. Miss Truss has repeatedly attacked Labour for proposing household bills support lasting just six months, as well as calling for increased windfall taxes on energy profit.
Darren Jones is Labour’s chairman of Commons’ business, energy, and industrial strategy committee. He stated: ‘We’ve always called for the targeted allocation of public money to those who most need them.
“Any ending of support for bill payers must be tapered, rather than facing a cliff edge.”
Mike Foster, the chief executive officer of the Energy and Utilities Alliance said that the announcement of tax cuts being withdrawn and the promise to reduce taxes would put enormous financial pressure on those who are already having trouble paying their bills.
National Energy Action stated that there was a lot of uncertainty for householders. John Palmer of Independent Age said, “Instead of providing stability, today provided uncertainty.”
According to the National Grid, this comes at a time when gas stocks are low and households could experience rolling blackouts of up to three hours in Britain.
John Pettigrew (pictured), who oversees UK’s power and gas networks said the company would need to institute rolling power cut on weekdays in January/February if the UK fails to get enough natural gas.
He said the first two months of next year were of particular concern, and a shortage of fuel for gas-fired power stations – which generate a large portion of the UK’s power – combined with slow wind speeds and lower imports of electricity from Europe would put strain on the grid
John Pettigrew, the chief executive of the firm, said that rolling power cut may be necessary in January or February. The blackouts are scheduled to occur during’really cold’ days within the week, should Britain not secure sufficient gas supplies from Europe.
The Financial Times Energy Transition Summit was attended by Pettigrew, who warned that Britain’s major power generators, the gas-fired power station, face a severe shortage of fuel.
Combining this with low wind speed for wind turbines as well as lower electricity imports from Europe would place too much stress on the grid. This could cause severe energy shortages which will require coordinated blackouts.
This warning was repeated by Pettigrew and the National Grid’s Electricity System Operator. (ESO) earlier in the month stated that businesses and households might experience planned outages of three hours to protect the grid.
However, King Charles and the Government would have to approve any move that involves blackouts.
Blackouts are reminiscent of the 1970s, when strike by railway workers and miners forced Ted Heath’s government into implementing planned power cuts in order to save energy.
Ofgem, Britain’s energy regulator said British homes should decrease their use of electricity and gas where it is possible in winter. This would help reduce power costs and increase the likelihood of power outages.
National Grid has set up a system to pay companies and households for reducing demand when there is limited supply.
A retired nurse at 85 says that her bungalow bills are now three times as high.
Mary Wiedman, 85, is already paying £180 a month to heat her one-bedroom bungalow. And from April – when the Governments energy price guarantee is due to be curtailed – that cost could soar higher still
Mary Wiedman, 85, is already paying £180 a month to heat her one-bedroom bungalow. And from April – when the Governments energy price guarantee is due to be curtailed – that cost could soar higher still.
After her supplier failed and the energy price caps increased, her bill went up by three times last year, according to this retired nurse.
In order to save money, the widow with four grandsons has turned off her bedroom’s radiators.
Mrs Wiedman is a Tory Party Member who lives near Hemel Hempstead in Hertfordshire. It is unclear to me how Prime Minister believes this is a reasonable solution.
Mrs Wiedman was a Tory Party Member who lived near Hemel Hempstead in Hertfordshire when she was younger.