July 2, 2022

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Five million households face energy budget crunch as bills soar overnight

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Five million households will be forced to spend at least 10 per cent of their budget on energy bills after Friday’s price cap hike, according to the latest analysis.

The prediction comes as the limit on bills leaps by 54 per cent, adding an average of £693 a year to the cost for those on default tariffs.

A number of major energy suppliers websites crashed Thursday as customers raced to submit meter readings ahead of the increase. Users reported being unable to access the websites of energy giants such as British Gas, SSE, E.ON, and EDF.

The price rises will double the number of households in “fuel stress” – a term for those spending 10 per cent or more of their income after housing costs on energy bills – overnight from 2.5 to 5 million in England alone, according to the Resolution Foundation think tank. The figures account for chancellor Rishi Sunak’s recent intervention to ease the impact.

With the price cap expected to rise sharply again later this year, the think tank said a further 2.5 million households could fall into “fuel stress” in the autumn unless more support is provided, bringing the total to 7.5 million. This is based on an estimated £500 increase in the price cap on 1 October.

Shadow climate change secretary, Ed Miliband, hit out at the prime minister and Sunak for not doing more to help. “On the day when energy bills rise by record amounts for millions of families, it is shameful that Boris Johnson and Rishi Sunak are refusing to go further to support the British people facing a cost of living crisis,” he said.

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“It tells you everything you need to know about this government that they stand by whilst working people, families, and pensioners suffer.”

In early February, Mr Sunak announced a support plan worth £350 – via a £150 council tax rebate and a repayable upfront £200 discount – for each of “the vast majority of households” to take the “sting” out of the rise.

But there are mounting concerns among some Tory MPs that the chancellor’s lack of fresh measures for the poorest households could take a toll in May’s local elections.

“There’s such a profound problem of seeming tone deaf when you’re out trying to drum up support,” one senior Conservative MP said. “People are starting to see their neighbours tighten their belts, and the demand build on local charities,” they added.

“The spring statement failed to help the most needy,” another Tory MP told The Independent. “It also failed to keep taxes down, too. The fuel duty cut’s been swallowed up as well, judging by most drivers’ experience. No one feels like a winner when they’re trying to sell high taxes and little [financial] support.”

The 1 April is the crest of the “acute” cost of living wave, according to the Resolution Foundation, as the price cap rise combines with other cost pressures in the economy to push inflation to a 40-year high.

Mr Sunak’s efforts to assist the economic shock from energy bills via council tax rebates will miss out more than half a million of the poorest households, it was warned.

Jonathan Marshall, senior economist at the Resolution Foundation, said: “Another increase in energy bills this autumn hastens the need for more immediate support, as well as a clear, long-term strategy for improving home insulation, ramping up renewable and nuclear electricity generation, and reforming energy markets so that families’ energy bills are less dependent on global gas prices.”

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Johnson told MPs on 9 March that he would be setting out an energy independence plan for this country in the course of the next few days. However, an energy strategy has yet to emerge and it is unclear when it will be published. The Treasury has reportedly resisted some of the long-term cost implications.

Ofgem, which regulates gas and electricity markets in Great Britain, announced on 3 February that the energy price cap – designed to prevent firms from making excessive profits – will increase for approximately 22 million customers from 1 April.

The regulator calculates it means the average household on default tariffs paying by direct debit will see a £693 increase to £1,971 per year for gas and electricity. There will be an increase of £708 from £1,309 to £2,017 a year for the average prepayment customer. Ofgem has said the increase is “driven by a record rise in global gas prices over the last six months”.

Freezing temperatures are due to hit as the price cap rise kicks in. Met Office meteorologist Tom Morgan said: “People will wake up [on Friday] to temperatures just below freezing, -1 or -2 across most of England and Wales for example, but by the afternoon we’ll see temperatures at 8 or 9C.”

He added: “Once again, on Friday night we’ll see temperatures widely fall below freezing across the whole of the UK and in the early hours of Saturday morning, possibly down to -4, -5C even in the south of England.”

The government is “in no doubt” that rising energy prices “will be a significant challenge for a majority of the British public”, No 10 said on Thursday.

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The prime minister’s official spokesman highlighted the support offered by the government and said: “We would encourage anyone that is concerned to make sure that they are availing themselves of the support that is available to them.”

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