Families are facing a “fiscal punch in the face” on 1 April with the imminent rise in the price of energy, Money Saving Expert founder Martin Lewis has told MPs.
Speaking just 24 hours before Rishi Sunak unveils his spring statement, Mr Lewis stressed that current government measures — an attempt to take the “sting” out of rocketing bills — were inadequate.
Last month the energy regulator said the maximum amount suppliers can charge 22 million retail customer will jump by more than 50 per cent, from £1,277 to £1,971.
“On 1 April people are going to feel a fiscal punch in the face when that [energy price cap] goes up for someone on typical use to £1,971 — that’s a £700 rise,” Mr Lewis told MPs.
With another review of the energy cap expected in October, Mr Lewis said the price crap then will be based on an assessment period of wholesale energy prices between February and the end of July.
“We are seven weeks through that 26 week period,” he said.
“Those seven weeks have included the highest ever wholesale rates in history — a completely unprecedented level — both because of the structural changes that have been going on in the market due to Covid and of course due to the dreadful situation in Ukraine.”
Mr Lewis said the prediction for October was “still another rise” to £2,500, with many people seeing a more than two-fold increase in energy bills over the course of the year.
On the chancellor’s £350 package for households — outlined last month — Mr Lewis added: “Even if you were to take both of those measures and pretend both were cash that is £350 to cover a typical £1,300 a year bill — that is clearly not enough.
He said there were many people who would “not be able to afford” the rise, “especially with only £350 worth of help”.
“For those on lower to middle incomes, £350 worth of help — of which £200 is questionable — to cover a £1,300 rise, well you don’t need to be the Money Saving Expert to work out no, that is not enough”.
Asked what suggestions he had for the government to support vulnerable people, he replied: “Well it needs to give them more money. It really is as simply as that”.
“The rocket science is not how we fix it. You fix it by making people’s bills cheaper. It’s having the the political will to get that done.”
Gillian Cooper, the head of energy policy at Citizens Advice, also told MPs said while she welcomed the government’s support package it was “inefficient for the scale of the crisis”.
“We absolutely have to recognise there are millions of households who are simply unable to cope with the energy bill increase we’re going to see this year,” she added.
Mr Lewis, who has become famous for his tips to consumers on the Money Savin Expert website, also warned about a “worrying issues” of energy companies increasing costumers’ direct debits disproportionately to the price cap increase, even for those in credit.
“There is no reason to double someone’s direct debit when they’re in credit and the price cap is going up 54 per cent,” he said. “That’s not mathematically sound and it’s a breach of licence conditions.
“I have been very concerned that a number of companies are doing it to improve their cash-flow situation at the expense of their customers, and I would like to see the regulator crack down on that quite substantially.”
Their remarks came as a Labour analysis claimed some low-paid families could lose the equivalent of a full months pay — around £1,238 — due to soaring prices, a looming hike in national insurance contributions, and real-terms cuts to universal credit.
The party, which is calling for a windfall tax to reduce the burden on consumers facing rocketing bills, said the “devastating cost” of the cost-of-living crisis was “causing desperate hardship”.
Labour’s shadow work and pensions secretary, Jonathan Ashworth, added: “Twelve years of Tory economic mismanagement have left working people and families exposed to surging inflation, punishing tax rises and severe real-terms cuts in support like universal credit.
“When respected money saving experts like Martin Lewis are warning people face a choice ‘between starving and freezing’ it’s clear the test of Rishi Sunak in his mini-budget is whether he takes the decisive, strong action needed to reduce energy bills, halt the NIC and help those who need real help and support as Labour has proposed.”
