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The Guardian - UK
The Guardian - UK
Business
Nadeem Badshah (now); Tobi Thomas ,Clea Skopeliti, Graeme Wearden (earlier)

Energy price cap: Zahawi urges people to cut back on use as charity warns bills could ‘wipe out incomes’ – as it happened

A summary of today's developments

  • The energy price cap will increase to £3,549 per year for dual fuel for an average British household, from 1 October. Regulator Ofgem has hiked the current price cap by 80%, up from £1,971 at present.

  • Ofgem also warns that the market for gas in winter means that “prices could get significantly worse through 2023”.

  • Chancellor Nadhim Zahawi said that people should try to cut back on energy use at this “difficult time”. Zahawi also repeated that he is working on options to support struggling households and businesses

  • Outgoing prime minister Boris Johnson said the government will announce further support next month for consumers struggling with energy bills.

  • The boss of Ofgem said the regulator has had countless meetings with the current government, as pressure mounts for a much wider package of support to help households through the winter misery. Jonathan Brearley told reporters this morning that soaring energy bills will be “a major issue for the country next year”.

In response to the UK’s fiscal watchdog, the OBR, saying it is ready to publish a mini-forecast alongside any fiscal announcement the next prime minister might wish to make in September, shadow Treasury minister Pat McFadden said: “While families and pensioners have been worrying about making ends meet, Liz Truss and Rishi Sunak have been playing fantasy economics. It’s time for them to get a reality check.

There’s no excuse for our next Conservative prime minister to try and wriggle out of proper scrutiny before announcing any cost-of-living measures this September.

“Labour has a plan to face this crisis and make sure no one pays a penny more on their energy bills, while securing our economy for the future by insulating 19 million homes and kickstarting the green growth we need.”

Updated

After Scottish Power chief executive Keith Anderson warned that the 80% rise in the energy price cap will be “truly catastrophic” for millions, a UK government spokesperson said: “We know people are incredibly worried about rising energy bills, following unprecedented gas prices across the continent driven by global events, including Putin’s aggression in Ukraine and his weaponisation of energy in Europe.

“Direct support will continue to reach people’s pockets in the weeks and months ahead, targeted at those who need it most like low-income households, pensioners and those with disabilities. As part of our £37bn package of help for households, one in four of all UK households will see £1,200 extra support, provided in instalments across the year, and everyone will receive a £400 discount on their energy bills over winter.

“The civil service is also making the appropriate preparations in order to ensure that any additional support or commitments on cost of living can be delivered as quickly as possible when the new Prime Minister is in place.”

Updated

UK stock indexes fell on Friday to log their biggest weekly decline since mid-June as concern mounted about the cost-of-living crisis.

Both the FTSE 100 and the FTSE 250 index logged weekly declines, with the latter sliding 3.6% in reflection of the impact of surging prices on business activity and the central bank policymakers’ aggressive tone on interest rates despite signs of economic slowdown, Reuters reports.

Some analysis of the implications of the new energy price cap.

The latest energy price cap increase by the regulator Ofgem threatens millions of households with an 80% energy bill rise from 1 October.

As the new price cap for a household with “typical consumption” on a dual-fuel tariff paying by direct debit has risen to £3,549 per year – and is forecast to jump to £5,341 between April and June 2023 – three people from across the country explain what the latest price rises will mean for them as the cold weather approaches.

The Guardian has spoken to several people about how the increase in prices will affect them.

Lindsey Parker, 43, an occupational therapist for the NHS from Brighton, says the latest energy price cap rise has put her hopes of moving into a studio flat out of reach.

“I lived in a flatshare until March, and when I was asked to move out I moved into a van over the summer to save up and maybe be able to afford to rent a studio for the winter, but then the cost of living crisis kicked in.

“I’ve looked into the prices for gas and electricity and nearly had a heart attack. Even with my full-time job, I could under no circumstances afford a small studio plus bills. I’d risk spending 75% of my income on housing. Now with the increasing energy bills, the cost of renting a bedroom in a shared house is £800 in the community I serve – nearly 50% of my take home pay, and they’re rising. So even that’s a stretch now.”

You can read the full report here:

Labour is at odds with Full Fact, the independent factchecking charity, after it claimed the party’s energy price cap freeze was underfunded by at least £5bn.

The party said Full Fact had got its sums wrong, saying the charity did not understand how direct debit works.

However, Full Fact was standing by its analysis on Friday, which said the party had not taken into account that people use more energy in the winter, causing Labour to underestimate the cost of freezing bills by at least £5bn, or £340 a household.

In response, it is understood that Labour is sticking by its sums, because direct debits are not meant to be above the level of the price cap regardless of higher usage in winter.

Keir Starmer announced his plan for a freeze on the current price cap at £1,971 earlier this summer, funded partly by a higher windfall tax on the profit of oil and gas companies.

You can read the full report below:

Citizen’s Advice have said that they are already seeing 2 people every minute needing crisis support, in response to the rise in energy bills and the general cost-of-living crisis.

43 climate activists have been arrested after petrol stations across London were sabotaged, police said.

You can read Damien Gayle’s report on the protest below.

Environmental protesters have taken action at petrol stations in central London, vandalising pumps, blockading entrances and spray painting “no new oil” across signs.

The Just Stop Oil campaign said 51 of its supporters took part in the demonstrations at seven petrol stations on Friday morning. Some groups staged sit-down protests at entrances or glued themselves to pumps, while others moved from station to station damaging pumps.

“Today’s action was timed to coincide with the announcement by Ofgem of a massive increase in electricity bills for October, which will push millions more into poverty, forced to choose between heating and eating,” the group said.

Friday’s protests were the third day of actions taken by supporters of Just Stop Oil this week, after it took a hiatus over the summer. The group says it is building up towards mass blockades of Westminster in October.

The Metropolitan police tweeted: “Protesters have targeted a number of petrol stations this morning, causing disruption [and] damaging pumps. Officers are at each of the targeted locations, we have made a number of arrests [and] specialist teams are removing those who are glued to pumps.”

People who use electric vehicles will be badly hit by the energy price cap rise, new analysis shows.

According to the RAC, the cost of a full charge at home for an EV with a 64-kilowatt hour battery – such as a Kia e-Niro – will be 33.80 under the new cap which comes into force on 1 October. This is compared with 18.37 under the current cap, and 13.69 for last winter’s price limit.

PA reports:

The figures represent the cost when using a seven-kilowatt charger.
EVs have soared in popularity in recent months, ahead of the ban on sales of new petrol and diesel cars and vans in the UK from 2030.

Figures from the Society of Motor Manufacturers and Traders show there was a 50% increase in registrations of pure electric cars during the first seven months of the year compared with the same period in 2021.

Rod Dennis, a spokesperson for the RAC, said: “The impact of the energy price cap increase will certainly be felt by drivers who charge their electric cars at home, with a full charge of a typical family-sized electric SUV costing 84% more from 1 October than it does under the current cap.

“Despite recent falls in the price of petrol and diesel, the cost of charging at home is still good value compared to paying for either fuel, but again underlines just how the rising cost of electricity is affecting so many areas of people’s lives.

“We’re also aware that public chargepoint operators are having no choice but to increase their prices to reflect the rising wholesale costs they’re faced with, which will heavily impact drivers who have no choice other than to charge up away from home.

Labour’s deputy leader Angela Rayner has said that Labour’s Warm Homes Plan has already saved people across the UK £2bn off their energy bills.

Speaking to LBC, Ofgem’s chief executive Jonathan Brearley has said that “things may well get much more difficult for customers”, and has called for the new prime minister to address the energy crisis as soon as they are elected.

Brearley said:

“We do need, when we have a new prime minister in ten days time, his or her staff to urgently address it [the energy crisis]”

“If we don’t change [the price cap] more frequently in this very very volatile market that we have, more companies will fail and ultimately those costs come back to customers and customers end up paying more.”

“The difficult news I have to share is that this price rice is enormous, but there is further pricing pressure in the market, so things may well get much much more difficult for customers – unless we work with the government, with the industry, with charities, to make sure we address the impacts early.”

The UK faces a winter of humanitarian crisis, writes Aditya Chakrabortty.

When [the price cap] kicks in, at the start of October, 25% of Britons will not be able to pay their fuel bills. They just don’t have the income, according to calculations by Citizens Advice. Crucially, half those people would normally be what the charity calls “financially stable”. In their first immersion into hardship, many will struggle to navigate their entitlements or the system. Some will sink. We are weeks away from creating a new poor.”

He argues that grassroots mobilisation, like the Enough is Enough and Don’t Pay UK campaigns, have a vital role to play:

Updated

A woman who cares for her disabled child has raised concerns about how the cost-of-living crisis will affect people “who are running a hospital-at-home situation”.

Nearly three quarters of households which include a person with a disability have been pushed into debt this year because of increases to energy and food prices, according to the charity Sense.

Carolynne Hunter with her daughter Freya, 12, who requires a lot of energy-dependant equipment as she lives with disabilities.
Carolynne Hunter with her daughter Freya, 12, who requires a lot of energy-dependant equipment as she lives with disabilities. Photograph: Carolynne Hunter/PA

Carolynne Hunter, 49, from Tillicoultry near Stirling, looks after her daughter Freya, 12, who has severe complex health issues and disabilities, at home. She is currently paying around £400 a month for her gas and electric, and has been advised this is set to rise to more than £700 from October.

To do that, a long list of energy-dependent equipment is required, such as a suction machine, a saturation monitor, an oxygen concentrator, an electric bed and an electric bath.

“So Freya has a huge amount of equipment that supports her to stay alive, basically at home. We call her area in the house, her room and her bathroom, we call it her little ward,” Hunter told the PA news agency.

“Our families are going to suffer, there’s going to be a mass crisis for the NHS and social care, and children will die if their families are not able to pay for it.”

Labour deputy leader Angela Rayner has called for the government to immediately implement an energy price freeze and an emergency budget.

Writing in the Daily Express, Rayner described the effect of the cost of living crisis on people in her constituency of Ashton-under-Lyne in Greater Manchester: “People have come to me with the most harrowing stories - skipping meals to feed their kids, making unimaginable sacrifices and going without just to make ends meet.

“I’ve helped out my own friends financially, been a guarantor for rents, and even lent out my car. But too many people now face breaking point.”

She called for the taxation of oil and gas companies’ profits, writing: “But it doesn’t have to be this way. We have a choice. Carry on letting oil and gas companies make huge profits whilst people suffer with bills rising this winter. Or do something about it.”

Owners of electric vehicles owners will be badly hit by the energy price cap rise, new analysis shows, but remain “good value” compared to petrol and diesel cars.

EVs have grown in popularity in recent months, ahead of the ban on sales of new petrol and diesel cars and vans in the UK from 2030.

The RAC said the cost of a full charge at home for an EV with a 64-kilowatt hour battery and a seven-kilowatt charger will be £33.80 under the new cap which comes into force. That is compared with £18.37 under the current cap, and £13.69 for last winter’s price limit.

RAC spokesman Rod Dennis said: “The impact of the energy price cap increase will certainly be felt by drivers who charge their electric cars at home, with a full charge of a typical family-sized electric SUV costing 84% more from 1 October than it does under the current cap.”

However, he said that the cost of charging at home remains “good value” despite recent falls in the price of petrol and diesel.

Ben Nelmes, co-founder and head of policy at green consultancy New AutoMotive, said: “Even with rising electricity prices, EVs will continue to be much cheaper to run than petrol or diesel cars.

“There are still great offers for EV electricity tariffs to further reduce the cost of charging. EVs can and should be part of the solution to the cost-of-living crisis.”

Northern Ireland EBSS payment likely to be single payment, DUP says

The DUP’s economy minister has said it is anticipated that the £400 energy support payment for households in Northern Ireland will be administered as a single lump-sum to energy companies.

In the rest of the UK, the Energy Bills Support Scheme payment will be paid on a monthly basis between October and March.

Gordon Lyons said: “Regardless of whether the Northern Ireland Executive was fully functioning or not, delivering the money direct from Treasury to the energy companies was always the simplest and most efficient way to get help where it is needed.

“From the taskforce discussions this morning, it is anticipated that bill-payers will receive a one-off lump sum of £400, whereas in Great Britain the £400 will be spread over a few payments. This could be delivered in November.”

Lyons called for an increase in the tax-free childcare scheme, as well as “the reversal of the national insurance increase, the removal of green taxes and a “better windfall tax on the energy companies”.

He added: “Working families need help this winter and the major levers whether that is energy security or food security rest in Westminster.”

Hello, I’m Clea Skopeliti and I’ll be updating the blog with the latest developments for the next couple of hours.

Updated

Stratospheric energy bills will 'completely wipe out incomes' for low earners

Low-income families are facing “stratospheric energy bills” that will completely wipe out their incomes, shocking new analysis from the Joseph Rowntree Foundation shows.

The JRF has calculated that the average low-income family will pay four and a half times more for energy in 2023/24 compared to 2021/22, based on the latest forecasts for energy bills from Cornwall Insight.

Single parents will hand over almost two thirds of their income after housing costs, creating a very real risk that their children will go hungry.

And some single adults will see their finances wiped out by stratospheric energy bills that make up almost 120% of their income after housing costs, leaving many destitute – forced to cut down on energy just to meet bills, with “no money whatsoever left over for food or other essentials”.

Peter Matejic, chief enalyst at the Joseph Rowntree Foundation, says significant help is needed, fast.

“In all my years as an analyst, I haven’t double-checked a piece of analysis as much as this one because it is so staggering, it feels incorrect.

It is impossible to think a care worker or a shop assistant will have to scramble to find hundreds more pounds to pay for their heating or that the entirety of someone’s income for a whole year will be less than their energy bill. But that’s what these figures suggest will be the case unless significant further steps are taken quickly.

Updated

Nearly three quarters of households which include a person with a disability have been pushed into debt this year because of increases to energy and food prices, according to Richard Kramer, chief executive of the charity Sense.

Sense fears the rise in the energy price cap could lead to catastrophe, unless there is more support.

Many disabled people will go into winter facing impossible decisions such as whether to eat or heat their homes.

The Government must recognise the enormity of the issue, the severe impact it is having on disabled households, and come up with a plan that will ensure support is available for those who need it.”

European wholesale electricity prices are hitting record levels again today, as the scramble to buy power intensifies:

Updated

Johnson: More cash coming to support consumers

Outgoing prime minister Boris Johnson has said the government will announce further support next month for consumers struggling with energy bills.

Johnson told reporters that previously announced support was coming this autumn - such as the £650 payment for the eight million most vulnerable households, and £300 cost of living payment for pensioners.

That support is “clearly now going to be augmented, increased by extra cash that the government is plainly going to be announcing in September”, Johnson said.

However, Johnson doesn’t give details of this extra cash – and as he has less than two weeks in office, we’ll have to wait for his successor to announce their plans.

Johnson adds that the government can’t cap bills for ‘absolutely everybody’, and should focus on the most vulnerable, saying:

“But what I don’t think we should be doing is trying to cap the whole thing for absolutely everybody, the richest households in the country.”

Johnson warns that the winter will be ‘tough’:

This will go on for a few months, and it will go on over the winter, and it will be tough.

He adds that the whole world is suffering an energy spike from Vladimir Putin’s aggression in Ukraine, but in the end Putin’s ability to impose economic blackmail will diminish over time, as countries cut their reliance on Russian energy.

The UK, for example, didn’t import any energy from Russia in June, for the first time since at least 1997.

Larry Elliott: Price cap hike could turn recession fears into reality

Soaring energy bills affect the economy in three key ways, our economics editor Larry Elliott writes:

First, they push up the cost of living, with the new price figure adding about four percentage points to the annual inflation rate. The Bank of England has already factored the October increase into its forecast for inflation to reach 13.3%.

Yet with the still rising global cost of gas now putting the price cap on course to breach the £5,000 a year threshold in January, the increase in price pressures could turn out to be much more significant. Earlier this week the US investment bank Citi predicted inflation would peak at more than 18% next year.

Threadneedle Street has raised interest rates at the last six meetings of its monetary policy committee and further increases are likely over the coming months.

Second, rising inflation depresses consumer spending. Wage rates have been picking up over the past year as workers have sought to maintain their living standards – but not nearly as fast as prices have been rising. That gap is growing, and with consumers forced to spend more on energy they have less to spend on other things.

Third, businesses are going to be hurt by increased costs and a reduction in consumer spending. The energy price cap only applies to consumers, and many small and medium-sized companies are going to face a triple whammy: higher fuel bills, higher wage bills, and falling demand.

Updated

Here’s an explainer of how the price cap works, and how the 80% increase in October will affect consumers:

Business groups fear that companies will go under, without a fresh package of support from ministers soon.

Richard Burge, chief executive of London Chamber of Commerce and Industry

“We are alarmed by today’s announcement of an energy price cap rise by Ofgem. High energy prices are pushing our firms to breaking point, particularly small and medium sized enterprises in London that cannot shoulder the meteoric rises with the ease of larger businesses.

If an intervention is not made by the government, we will see a significant number of businesses go under due to unsustainable trading conditions.

We reported yesterday that small firms feared for their future, with some seeing their bills quadruple, including:

  • A hotel in Aberdeen which says it will be cheaper to close for the winter than heat rooms for guests.

  • A fish and chip shop in Oswestry, Shropshire, where annual energy bills are rising from £9,000 to £35,000.

  • A chicken takeaway franchisee in Peterborough who fears customers will desert him if he pushes up prices to pay his bills.

  • An indoor mushroom farm in Bangor, Gwynedd, whose strong trading has been undermined by a “ridiculous” hike in its energy costs.

UK bus users face “significant” price rises in 2023 since operators expect to lock in fuel purchases for next year at high rates, a senior executive at one of the largest companies has told the Financial Times.

That would add to the cost of living squeeze for millions who rely on buses for transport, on top of surging energy bills.

Go Ahead’s Phil Southall, a senior bus director, told the FT that the company may be forced to increase fares if it locks in higher rates for diesel in the months ahead.

Here’s the details:

Go Ahead, which operates 6,000 buses in the UK, usually secures half of its supply a year in advance, a quarter three years out and the final quarter four years early.

The strategy means that it will be locking in prices for 2023 fuel later this year.

“That’s when it will hit us, when you come to negotiate the price, then the only option is to pass that on to customers,” he said.

“It will be at least a 10 per cent increase in fares, because you have no other option.”

Ofgem had 'countless' meetings with the government

The boss of Ofgem has said the regulator has had countless meetings with the current government, as pressure mounts for a much wider package of support to help households through the winter misery.

Jonathan Brearley told reporters this morning that soaring energy bills will be “a major issue for the country next year”.

This is a major set of decisions that the new government will need to make, that the new prime minister and his or her ministerial team will need to make,”

Brearley reiterated his call for urgent action from the government to “match the scale of the problem”, with average energy bills set to soar 80% from the start of October.

“It’s not for me to comment on the proposals that are out there for politicians.

“My point is very simple, it is going to need to be taken urgently and it’s going to need to be decisive.

“And it’s going to need to match the scale of the problem that we see - which version of that that the Government chooses to pursue really is a matter for them.”

Chancellor Zahawi added:

Very few people anticipated war. Wars happen in far-flung places. It is now here with us. We have to remain resilient. My responsibility is to deliver that help.”

Here’s some reaction to the suggestion we should all examine our energy consumption:

Zahawi: We should all look at our energy consumption

Chancellor Nadhim Zahawi has now told broadcasters that people should try to cut back on energy use at this ‘difficult time’.

Zahawi also repeated that he is working on options to support struggling households and businesses, as he said in a statement this morning.

Reuters has the details:

“We know we need to do more because actually the most vulnerable households have no cushion,” Zahawi told reporters. “More help is on its way ... I am doing the work to make sure that will be in place throughout next year.”

Zahawi said Russian President Vladimir Putin was using energy as a weapon and would continue to do so, so Britain needed to remain resilient for the long term and make sure any help was not just a sticking plaster.

Asked if people should reduce their energy use, Zahawi said: “The reality is that we should all look at our energy consumption, it is a difficult time.”

But, as the price cap will be almost triple its level last winter, it’s obviously not realistic for households to cut back enough to avoid bills rising very significantly, unless they simply turn off the heating and endure freezing temperatures this winter.

Updated

Labour’s shadow chancellor Rachel Reeves has accused the government of a ‘dereliction of duty’ for not fronting up early this morning to respond to the price cap announcement.

Reeves told BBC Breakfast that ministers were nowhere to be seen, at a time when people were “worried sick” about rising bills.

“The fact that no Government minister is available to come on your programme today is just appalling.

“They are not here to give assurances, they are not here to set out what they are going to do.

“That is a dereliction of duty.”

Ministers were unusually absent from the airwaves when the Ofgem announcement came, even though they had plenty of warning it was coming at 7am.

Calum Macdonald of Times Radio thinks there was a ‘full house of no-shows’ on the early morning round across radio and TV:

Kate Garraway, one of the presenters on ITV’s Good Morning Britain, urged the Government to put forward a representative to speak to them.

“Who we’re not hearing from so far this morning is the Government themselves,”

“And we would love you to come on and give us some guidance.

“I know there is a leadership election currently there, so there will be issues about who is actually going to be at the helm come the week, 10 days when that decision is made, but we would love to hear from you this morning, because there is a lot of people that want clarity.”

‘I’m scared when anyone says winter’: shocking tales from UK energy crisis frontline

The energy price cap rise is just one in a stack of mounting problems which are hitting households, as our energy correspondent, Alex Lawson, reports from Leicester:

A tear rolls down Shama Omar’s face.

She is describing the pain of her disabled daughter’s death last year, after 29 years of attentive care. It is a familiar tale of delays and stretched health service resources.

“If the GP had seen her on that day, my daughter would have not died,” she says.

Now, she is surviving on one cooked meal every two weeks, deciding on whether to pay for council tax, food or water next. “I need to take cancer medication, which gives me hot flushes but I can’t afford to have the fan on all the time,” says Omar.

“I had to think whether to spend £4.60 for the bus here, that could have helped me make meals for two days.”

Omar is among the millions waiting to see what further support government may offer for energy bills. On Friday, the industry regulator will announce yet another rise in the price cap, pushing average household bills to an expected £3,500 a year from October. By January, two-thirds of households in the UK are expected to be in fuel poverty.

Omar sits across the table in a snug booth within a community centre in Leicester. The facility is run by the the Zinthiya Trust, which was founded by a charity worker, Zinthiya Ganeshpanchan, to alleviate poverty and provide support to survivors of domestic abuse.

Its work is part-funded by the British Gas Energy Trust, which is increasingly working on helping its customers, and those of other suppliers, pay their gas and electricity bills, along with support in clearing debts and finding extra cash through benefits checks.

Here’s the full piece:

Watch: Ofgem CEO says prices likely to rise higher

Jonathan Brearley, Ofgem’s chief executive, has warned that prices are likely to keep rising:

He told BBC News:

‘It is possible that there may be peace between Russia and Ukraine, that things may change and indeed prices may stabilise or come down, but it is more likely that prices continue to rise.’

Brearley hasn’t given an estimate, but as we flagged earlier, consultancy Cornwall has warned average bills could surge to over £6,600 per year in April, based on current market prices.

Updated

Terminally ill people could freeze to death this winter without further support, warns Matthew Reed, chief executive of end-of-life care charity Marie Curie.

Reed explains that targeted support is needed, to help those who need energy for their care:

“The need to stay warm to keep pain at bay and power specialist medical equipment means that energy bills for some terminally ill people will be thousands of pounds higher than the average household.

“Many won’t be able to afford this. With 30% of excess winter deaths attributable to cold, damp housing, this could cost lives.

“Our research shows that working age people are at a huge risk of falling into poverty after a terminal diagnosis. They often have to give up work.

“They don’t qualify for their state pension. They cannot claim Winter Fuel Payments and do not automatically qualify for the Warm Home Discount scheme either.

“Dying people are falling through the cracks. They need targeted Government support now.”

Some of Britain’s poorest families will see as much as 47% of their entire household budget swallowed up by energy costs this autumn, figures produced for the Guardian show.

The calculations were done by investment platform Interactive Investor today, after the new energy price cap announcement, and are based on figures from Ofgem and Office for National Statistics (ONS) family spending data.

Alice Guy, a personal finance expert at the platform, said:

“The figures are truly terrifying. The rising energy price cap will have a disproportionate and devastating effect on poorer families who will spend a huge proportion of their budget on energy this autumn …

Meanwhile, affluent families are better insulated from the effects of the energy crisis. While still painful, they will spend a much smaller proportion of their household budget on fuel this autumn.”

Nearly nine million households will be in fuel poverty once bills surge in October, warns the fuel poverty charity National Energy Action.

Adam Scorer, National Energy Action (NEA) chief executive, says the government has had ample time to prepare an intervention:

Without bold action to support the most vulnerable and those on the lowest incomes, this will effectively prise their fingers from the cliff edge and push them over the precipice.

The government needs to immediately upgrade the household support package it first announced back in May. Households need money in their pockets to weather this storm or we are going to see millions in dangerously cold homes, suffering in misery with unimaginable debt and ill health.

Analysts at ING have calculated that UK households may collectively need up to £65bn extra in government support to offset the forthcoming rise in energy bills this winter.

ING’s James Smith explains that wholesale gas price rises mean the government’s existing support package should be extended.

The most practical option would be to dramatically increase the £400 energy bill discount being offered to all households, as well as increasing the value of payments being given to those on income support/benefits, he argues:

Our own estimates based on gas and electricity futures contracts this week point to an average annual household energy bill of around £5,300 across that same 12-month period from October (peaking at roughly £6,500 on an annualised basis in the three-month period between April-June 2023).

That takes our aggregate household cost estimate up to around £130bn – a £65bn increase on May’s projection - and this estimate is rising on an almost daily basis.

Admittedly that figure is a bit of a simplification – it relies on a number of assumptions, not least that those wholesale futures contracts provide an accurate gauge of where prices will land this winter. Many of those contracts are trading fairly illiquid right now. But it gives a sense of what the new Prime Minister will be faced with when they take office in early September.

UK natural gas prices
UK natural gas prices Photograph: ING

ScottishPower chief executive Keith Anderson, who has proposed a two-year bill freeze at an estimated cost of £100bn to ministers, says:

“The size and scale of this issue is truly catastrophic for UK households and that’s why only a big solution can tackle it once and for all to shelter people from the worst this winter.

“We have offered Government a plan, backed by the industry, that can be delivered this year, tailored in line with their priorities and will support the UK economy - with the cap set at £3,549, what billpayers need now is to hear what additional help is coming.”

Updated

Morgan Vine, Head of Policy and Influencing at Independent Age, warns older people face “a winter of despair”, with more people likely to die due to fuel poverty.

“The extortionate new energy price means that someone who lives off their State Pension would have to spend more than a third of their income on energy alone. For others in later life with lower State Pensions, the situation will be even more dire.

“This price hike is not something older people can simply endure. Millions of older people on low incomes will be forced daily to make dangerous decisions. For many it will no longer be a choice between heating their home or eating a meal, they will be unable to do either. If the government takes no action, more people will die this winter because of fuel poverty.

This would truly be a dereliction of duty and cannot be allowed to happen.

“The government needs to announce an immediate package of support that is fast acting and big enough to ensure all older people who need help can afford to heat their homes this winter. There is no time to kick the can down the road to the new Prime Minster, millions of older people in financial hardship need support now.”

Britain is on course for a winter catastrophe unless significant help is provided, says Torsten Bell, chief executive of the Resolution Foundation:

“A price cap of £3,549 from October, with another rise likely in January, means that

“Winter energy bills are set to average around £500 a month, while pre-payment customers will need to find over £700, more than half their disposable income, to keep the heating on in January alone. These costs pose a serious threat to families’ physical and financial health.

The sheer sheer number of households needing help means the government must deliver “a rapid and broader response”, says Labour MP Darren Jones MP, head of the BEIS committee:

“With energy prices continuing to skyrocket, the next prime minister will have to deliver significant amounts of financial support to households and businesses, similar to help offered during the Covid pandemic.

“Many businesses will face bankruptcy because there is no price cap on their energy bills. The scale of the challenge will mean that the next chancellor will have to offer business grants and not just temporary tax and business rate cuts.

Analysts: Typical annual energy bill could hit £6,600 a year in April

In a grim, shocking development, analysts are predicting that average energy bills will rocket to over £6,600 next April.

Energy consultancy firm Cornwall Insight, who have a good track record of predicting the price cap, have released new forecasts following this morning’s announcement from Ofgem.

They now believes the price cap will reach £5,386.71 in January next year, when the cap next changes, before soaring to £6,616.37 in April.

Dr Craig Lowrey of Cornwall says UK bills are the victim of an unstable and unpredictable global market, and called for the price cap system to be reviewed.

While there is still some time until the January and April caps are set, the energy crisis is showing no sign of abating.

With every unprecedent rise in bills comes the need for greater reflection on the cap’s purpose and continued place in the energy market. Throughout the energy crisis, the government and Ofgem have remained committed to the cap, and in its ability to shield consumers from a volatile energy market.

However, the cap was never meant to be a permanent solution, it was created for a different energy market than the one we face today and has not protected consumers from what will be incredible hardship this winter. We urge, as we have done previously, for the cap to be reviewed and mechanisms for protecting the most vulnerable, such as social tariffs, to be considered as viable alternatives.

In the meantime, a key focus for the next Prime Minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise. There are several avenues that can be explored including a review and expansion of the current support package of at least £400 per household.

Sturgeon: price cap rise cannot be allowed to go ahead

Nicola Sturgeon, Scotland’s first minister, says the price cap rise is simply unaffordable and mustn’t go ahead.

She adds:

This rise must be cancelled, with the UK government and energy companies then agreeing a package to fund the cost of a freeze over a longer period, coupled with fundamental reform of the energy market.”

Tackling the energy crisis will require a nationwide mobilisation effort similar to the Covid vaccine rollout, says professor Stefan Bouzarovski, expert in energy poverty at the University of Manchester:

The UK government must mobilise immediately, drawing inspiration from its European counterparts that have acted quickly and decisively.

Funds for such measures can be drawn, in part, by further taxing those who stand to profit from high wholesale energy prices, with the windfall tax introduced in May unlikely to go far enough.

“This support should not just be limited to fiscal policy, however. Policymakers must implement practical measures to help deal with the fallout of surging prices, such as collective energy service provision - or “heat banks” - for those unable to heat their homes.

Parallel to this, we must accelerate the rollout of energy efficiency measures across the country, to help protect us from future shocks of the same nature.

Becca Lyon, head of child poverty at Save the Children, has called the price cap rise “a full-blown economic crisis for thousands of families”.

She said:

“Children are at serious risk from today’s announcement and could spend this winter in cold homes, with fewer hot meals, despite the best efforts of their parents and carers. Our children deserve better.

“Families are already squeezed to the limit and while facing increased energy costs, they could also be paying 1,000 a month or more on childcare, even with Government help.

“Parents want to do their best for their children but how can they when they’re facing costs per month that come to more than their incomes?

“Debt and hardship are the only likely outcome from today’s price cap rise.”

Dr Carole Easton, chief executive of the Centre for Aging Better charity, fears there will be a ‘significant’ rise in deaths this winter because people can’t afford to keep warm, as Martin Lewis also warned this morning.

She says:

“The threat of dizzying increases in energy bills has been looming for months, with today’s announcement confirming many people’s worst fears.

Millions now face a long, cold and dangerous winter. Already around 10,000 people die a year because their homes are too cold. There is a clear and present danger that this number will rise significantly this winter without drastic measures.

“Immediate financial support is necessary. Three in ten older households in England with at least one person aged 60 or over are already fuel-stressed before these impending increases. And over 65s are most likely to already be cutting back on gas and electricity. Further rationing will lead to significant negative impacts on their health.

Centre for Aging Better also warn that many older people are already cutting back on energy usage:

  • 29% older households in England already “fuel-stressed” (spending more than 10% of their post-tax income on energy bills to stay warm)

  • A couple over 60 living in a home with the lowest EPC rating (G) can expect their average bill to almost double under the new energy price cap from £4771 to £8671, according to E3G analysis of English Housing Survey data including modelled impact of price caps

  • UK households with older occupants spend around twice as much on energy as younger households and were twice as likely to be living in draughty homes

  • Majority of older people are already cutting back on gas and electricity use in their homes, more than any other age group (59% for 65-74 year olds compared to 47% 25-34 year olds)

Updated

The Green Party are calling for the price cap to be returned to its October 2021 level (when average households were paying £1,277 per year), and for the Big Five energy retailers to be nationalised.

Green Party co-leader Carla Denyer says:

“This latest rise in the price cap is a horrifying blow to households across the country and a reminder of just how broken our energy system is.

“Without proper intervention, people are going to die as a result of these unaffordable energy prices. Yet the government continues to sit on its hands, offering no help and no reassurance to the millions of people who are wondering how they are going to survive this winter.

“Only the government can make an intervention of the scale and speed required to help people through this crisis. We need to return the price cap back to what it was in October 2021, so that it is much more affordable for more people, and allow the government to absorb the global price rises through taxing the huge profits of the oil and gas companies.

“We will then need to bring the big five energy retailers into public ownership to stabilise the market and lay the groundwork for the huge investment we need to see in renewables and insulating peoples’ homes, starting as soon as possible.

The TUC warns that the energy price cap rise is “a hammer blow to family budgets” which will push millions into fuel poverty.

TUC General Secretary Frances O’Grady calls for the “catastrophic” price rise scheduled for October 1st to be cancelled, saying the government is ‘missing in action’.

“Nobody should have to worry about heating their homes this winter.

“But millions are facing bankrupting bills in the months ahead.

“Today’s energy price rise will be hammer blow to family budgets and tip many households into fuel poverty.

“Ministers must immediately cancel this catastrophic increase. This is the worst possible time for the government to go missing in action.

“And to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership.”

Martin Lewis: lives will be lost this winter without more help

Money saving expert Martin Lewis has warned that people will die this winter because they can’t afford to heat their homes, unless the government provides more support with energy bills.

Lewis tells the Today programme that the new price cap, from 1 October, is 37% of the new state pension. It’s a even bigger proportion for those who retired earlier, and for those on universal credit.

Lewis says:

This is a catastrophe, plain and simple. Unaffordable.

Ofgem’s Jonathan Brearley has effectively said that the crisis is now ‘out of our hands, and beyond our power’ when he called for government intervention this morning, Lewis explains, saying:

If we do not get further government intervention, on top of what was announced in May, then lives will be lost this winter.

Too many people to think about, because of these unaffordable, terrible, rises in energy bills.

Lewis also points out that the £3,549 price cap figure is an average for those on direct debit –- those with higher than average energy use will pay more, as will those on pre-payment meters.

There is nothing to stop somebody from paying ten thousand pounds a year, Lewis adds; he fears households with adults or childen with disabilities who need special electrical equipment could pay that much.

We are in an absolutely horrendous situation, and it is going to get even worse in January when the cap for somebody on typical use will move up to over £4,000.

Updated

Ofgem’s price cap hike means energy bills will be almost triple their level last winter, when the price cap on the average dual fuel bill was £1,277:

The government needs to get a grip now, if it is to avert a major winter energy crisis, says Miatta Fahnbulleh, chief executive of the New Economics Foundation.

Zahawi says he is working flat out on energy support plan

Chancellor Nadhim Zahawi says the government was “working flat out” to develop a new package of support for consumers.

Responding to the 80% jump in the price cap, Zahawi says:

“I am working flat out to develop options for further support.

This will mean the incoming Prime Minister can hit the ground running and deliver support to those who need it most, as soon as possible.”

But six months ago, the government had a package of support ready to coincide with Ofgem’s previous price cap announcement. This time, the Conservative leadership campaign means millions of households must wait to see what help will be provided.

It’s also not clear if Zahawi will get to implement the plan – with strong rumours that Liz Truss would appoint Kwasi Kwarteng as her chancellor.

Updated

Jonathan Brearley has also told Radio 4’s Today Programme that the October price rise will be ‘devastating’ for households, and called for urgent and decisive action from the next PM:

Ofgem: government must act to tackle rising prices

Ofgem is urging the next Prime Minister and their cabinet to provide “an additional and urgent response” to continued surging energy prices.

In an admission that the scale of the energy crisis is beyond the regulator’s powers, CEO Jonathan Brearley says:

“The Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action.

The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”

Key event

Ofgem acknowledges that surging energy prices will cause hardship in the months ahead:

Chief executive Jonathan Brearley says he knows the “massive impact this price cap increase will have on households across Britain”.

I talk to customers regularly and I know that today’s news will be very worrying for many.

Brearley points the blame at Moscow, for squeezing gas supplies to Europe, driving up wholesale prices:

“The price of energy has reached record levels driven by an aggressive economic act by the Russian state.

They have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.

Key event

As well as lifting the price cap by 80%, Ofgem has also today strengthened the rules around direct debits to ensure suppliers set them at the right level.

This should meaning that customers only pay exactly what they need to, the regulator says, adding:

The changes will stop suppliers from building up excessive customer credit balances and using them in a risky way as working capital.

Ofgem: prices could get significantly worse through 2023

Ofgem also warns that the market for gas in winter means that “prices could get significantly worse through 2023”.

It isn’t giving price cap projections for January, when the cap will next change, “because the market remains too volatile”.

Ofgem says the increase in energy bills reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.

Ofgem lifts Britain's energy price cap by 80%

Newsflash: the energy price cap will increase to £3,549 per year for dual fuel for an average British household, from 1 October.

As feared, Ofgem has hiked the current price cap by 80%, up from £1,971 at present.

The regulator says:

The price cap, as set out in law, puts a maximum per unit price on energy that reflects what it costs to buy energy on the wholesale market and supply it to our homes. It also sets a strict and modest profit rate that suppliers can make from domestic energy sales.

However, unlike energy producers and extractors, most domestic suppliers are currently not making a profit.

The move will intensify the UK’s cost of living crisis, with inflation already over 10%, and add to pressure on the government to announce a new package of support.

Details and reaction to follow…

Updated

Liz Truss doubled down on her reluctance to “bung more money” at those who will struggle to afford spiralling energy costs this winter, while Rishi Sunak said millions may be forced into destitution without extra support, as the pair clashed at the penultimate hustings of the Conservative leadership race last night.

With energy regulator Ofgem expected to raise the price cap to £3,500 a year from October for the average dual-fuel tariff, Truss warned the issue of spiralling fuel costs was not a short-term one.

She told the audience in Norfolk:

“If people think this problem is going to be over in six months they are not right. This is a long term problem.”

But Sunak said her planned tax cuts would fail to help pensioners and those on lower incomes, and added that extra support for businesses struggling with energy bills was “clearly something the new prime minister will have to look at”.

The union Unite has accused energy companies of “rampant corporate profiteering”, adding to the cost of energy.

Unite has calculated that major energy suppliers, distributors and generators had made a combined £15.8bn in profits in the past year. Unite general secretary Sharon Graham claims “rampant corporate profiteering is at the very heart of soaring energy bills”.

Unite national officer for energy, Simon Coop, said:

“Ofgem is a regulator which doesn’t regulate.

It appears to simply be passing the parcel of the energy giants’ profits directly on to the consumer. It’s clear that piecemeal action will not solve the scale of these problems. Sooner or later taking the energy giants back into public ownership will have to be contemplated.”

Almost half of Britons questioned on the UK’s current energy crisis blame the Government more than the energy firms, according to a new poll.

Research by Focaldata of 1,021 adults from across the UK showed that 47% of respondents blame ministers for “failing to prepare and prevent” the huge rise in energy bills.

Just under a third, 30%, condemn the energy firms.

The polling, on behalf of Cavendish Advocacy found that 92% of people who took part are “concerned” about the energy crisis, with two-thirds “very concerned”.

Tom Bradley, head of energy & green growth at Cavendish Advocacy, said the situation will get worse once the price cap is announced.

“The debate has moved on as to how the country has reached a critical point where energy bills may top more than £3,500 a year.

“Our polling shows that the public expects both politicians and the energy industry to take responsibility and bring more stability and affordability to the market.

“Surprisingly, almost a fifth of UK adults are willing to pay more if the money was invested in better infrastructure to prevent potential blackouts or gas supply issues.

“The cost of living is the core issue dominating our politics right now, and that is being driven by soaring energy prices. The public will be looking on with much interest on Friday as to what politicians and the industry do next to try and mitigate this energy crisis.”

Truss promises 'immediate support' to fight energy crisis, if she becomes PM

British Foreign Secretary and Tory leadership candidate Liz Truss at the Conservative Party leadership election hustings at the Holiday Inn Norwich North last night
British Foreign Secretary and Tory leadership candidate Liz Truss at the Conservative Party leadership election hustings at the Holiday Inn Norwich North last night Photograph: Tolga Akmen/EPA

Liz Truss, the front-runner to succeed Boris Johnson as prime minister, has pledged ‘immediate support’ to help the hardest hit families with soaring power bills if she becomes prime minister.

Writing in the Dail Mail, Truss (who has previously favoured tax cuts over ‘handouts’) says:

“The impact on our cost of living is clear at the supermarket checkout, at the petrol pump and on our latest energy bills.

“I know how hard it is for millions of Britons, and how grave concerns are about the consequences of today’s decision by Ofgem on the next energy price cap.

“The rest of Europe is facing the same challenge, which will loom large as winter sets in.

“If I am elected leader of the Conservative Party and prime minister, I will take decisive action on entering No 10 to provide immediate support, but will also tackle the root causes of these issues so we are never again in this difficult position.

“To those of you feeling the squeeze, my message is clear: I will ensure support is on its way and we get through these tough times.”

My immediate priority will be to put more money back in people’s pockets by cutting taxes, such as reversing the rise in national insurance.

I would also suspend the green levy on energy bills, bringing down average energy bills by £153. This will build on the work already underway, such as the Energy Bills Support Scheme, which will see a £400 discount paid to consumers from October, and the £1,200 package of support for the most vulnerable.

More here: Truss unveils plans to beat energy crisis: Tory leadership favourite ‘will give multi-billion bailout to hardest-hit families’ as price cap rockets to £3,500-a-year from TODAY and reveals she will hold emergency budget DAYS after entering No10 if she wins

Starmer: rising energy bills will be devastating for people and businesses

Labour leader Sir Keir Starmer during a visit to the Juniper House housing development in Walthamstow, east London, to see how families will save money on their energy bills through the installation of heat saving measures this week.
Labour leader Sir Keir Starmer during a visit to the Juniper House housing development in Walthamstow, east London, to see how families will save money on their energy bills through the installation of heat saving measures this week. Photograph: Stefan Rousseau/PA

Keir Starmer MP, Leader of the Labour Party, has warned that the energy price cap rise will be ‘devastating’:

“The announcement of a dramatic increase in the cost of energy bills is going to be devastating for people and businesses across the country.

“Labour’s fully-funded plan to freeze bills and save households £1,000 this winter is a simple matter of common sense and fairness. We will not allow oil and gas giants to make record profits from the suffering of ordinary families and businesses. It’s astounding the government does not understand this.

“As well as acting to fix the immediate problem, Labour will also bring down bills in the long-term by investing in sustainable British energy and insulating homes across the country.

“The fact the government is absent at this time of national crisis is unforgiveable. Families and business owners are worried sick. Everyone is now feeling the harsh reality of the Tories’ failure. The country deserves strong leadership, urgent action and a plan for the future. Only Labour can give Britain the fresh start it needs.”

Full story: Labour calls for emergency budget as energy cap set to top £3,500

Wih pressure mounting for an emergency budget to tackle the cost of living crisis, stark data showed that Britons are already worried about bills this summer despite low energy usage compared with the winter peak.

A YouGov poll showed about 40% of 1,700 adults surveyed have struggled with food and energy bills over the past three months. Around three-quarters of those polled said the government is doing too little to help those struggling with the recent rise in the cost of living, including two-thirds of Conservative voters.

The shadow chancellor, Rachel Reeves, said:

“The only people resisting measures to help people are the government. We wanted parliament to be recalled ahead of the [Ofgem] announcement but that did not happen.

“We want an emergency budget. We want the government to say what they are going to do. This announcement is going to strike fear into the hearts of families up and down the country. Urgent action is needed. Everyone has come up with plans for action apart from Liz Truss and Rishi Sunak – the two people who can actually do something about it – who have been silent.”

Here’s the full story:

Introduction: Ofgem to announce energy price cap today

Good morning.

The scale of Great Britain’s winter energy crisis will be laid bare this morning, when regulator Ofgem announces how high the price cap on bills will rise in October.

Ofgem is expected to approve a record increase, lifting the average annual dual-fuel tariff in England, Scotland and Wales to above £3,500 a year from October for the average dual-fuel tariff.

That would be an staggering increase of 80%, from the current average cap of £1,971.

The surge in gas prices this year due to the Ukraine war, and Russia’s cuts to European energy supplies, mean households and businesses face very painful increases in bills.

The day-ahead price of UK gas over the last two years
The day-ahead price of UK gas over the last two years Photograph: Refinitiv

Millions more homes face being pushed into fuel poverty, while firms (who aren’t covered by the price cap) are warning that they will not be able to keep operating without help.

Analysts predict that prices will keep rising in 2023 too. Cornwall Insight, the energy consultancy, have estimated annual bills will surge again to £4,649 from January to March, and £5,341 from April to June.

Other analysts have predicted even higher rises, as wholesale gas prices have soared in recent weeks.

This energy shock will need fresh government support, economists insist, on top of the cost-of-living package announced in May.

Labour have already called for an emergency budget, and a freeze in bills this winter, costing an estimated £29bn. It says the two candidates to lead the Conservative Party have failed to grasp the scale of the crisis, even though two-thirds of households, or about 45 million people, could be pushed into fuel poverty by January.

Rishi Sunak has promised to scrap VAT on energy bills and an as yet uncosted increase in help for households on benefits, while Liz Truss has pledged assistance “across the board” for companies and households.

Yesterday, education minister Will Quince pledged there would be more support on top of Sunak’s initial energy package three months ago.

“There is no question in my mind whatsoever, both listening to the two leadership candidates but also just looking at our economy … that the Government is going to act and put in place a further package of support measures,” Quince told LBC radio.

“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.”

Ofgem’s announcement is expected at 7am.

Also coming up today:

What’s said to be the UK’s biggest strike of the summer is taking place today, as Royal Mail staff hold industrial action in a pay dispute.

More than 100,000 postal workers are expected to take part, as the Communication Workers Union (CWU) pushes for a wage rise to reflect soaring inflation.

The CWU says it’s rejected a 2% pay rise, pointing out that:

“In an economic climate where inflation looks set to soar to 18 per cent by January 2023, the imposition will lead to a dramatic reduction in workers’ living standards”.

But Royal Mail says its deal is worth 5.5% (still below inflation), if workers accept new terms and conditions including more Sunday deliveries, as it tries to compete for more parcel delivery business.

Central bankers are gathering in Wyoming for the annual Jackson Hole economic symposium, where the fight against persistent global inflation will be high on everyone’s mind.

Jerome Powell, the head of America’s central bank, will give an eagerly-awaited speech at 3pm UK time. Investors will watch whether Powell reiterates the Federal Reserve’s stance of raising interest rates to cool prices, or hints at a pivot, as major economies slip towards recession.

The agenda

  • 7am BST: Ofgem announces UK price cap changes

  • 7am BST: GfK’s German consumer confidence survey

  • 1.30pm BST: US PCE index of inflation for July

  • 3pm BST: Federal Reserve chair Jerome Powell speaks at Jackson Hole

  • 3pm BST: University of Michican’s consumer confidence index for August

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