Martin Lewis is warning that the latest energy price cap predictions from Cornwall Insight of £3,582 from October and £4,266 in January will result in older people needing to use nearly 45 per cent of their annual New State Pension to pay their heating bills next year if no action is taken now by the UK Government.
The consumer champion urged the “zombie government” to “wake up” sooner than September 5, calling the amounts forecast for millions of households on the price cap, “unaffordable”. Posting on his official Facebook page, he wrote that the rise swallows up not just the £400 energy bill rebate coming for homes in October, but also the £1,200 being paid to the poorest through the cost of living support package.
He warned: “This will leave many destitute. Tax cuts won't help [the] poorest including many elderly and disabled who've higher usage. Cutting the green levy'd be just tiny sticking plaster on a gaping wound.”
Potential impact on annual State Pension payments from January 2023
The current price cap is £1,971, however, based on Cornwall Insight’s predicted £4,266 energy price cap from January, people on State Pension will undoubtedly see their annual income stretched.
New State Pension
- Weekly payments: £185.15
- Annual payment: £9,627.80
- Energy bill from January: £4,266
- Energy bill impact: 44.3% of annual payment
Basic State Pension
- Weekly payments: £141.85
- Annual payment: £7,376.20
- Energy bill from January: £4,266
- Energy bill impact: 57.8% of annual payment
The founder of MoneySavingExpert.com also warned that Liz Truss and Rishi Sunak should not ignore the crisis.
He said: “The leadership debate must not ignore this portentous national cataclysm any more.
"The leadership debate must not ignore this portentous national cataclysm any more. They can't say they weren't warned, the excuse 'we need to wait for Ofgem figure' doesn't wash. In May the government asked Ofgem for forward guidance and made plans based on that. It can do the same now.
"An action plan is needed TODAY. They are all in the same party, let's call on them to come together for the good of the nation rather than personal point scoring. People's livelihoods, mental wellbeing and, in some cases ,very lives depend on this.
“This is desperate."
Last week, Ofgem announced changes to the way in which it calculates the price cap on energy bills. Instead of a review every six months, the regulator said it will conduct the review every quarter.
Commenting on the change and the latest energy price cap prediction, Craig Lowrey, principal consultant at Cornwall Insight, said: “While our price cap forecasts have been steadily rising since the summer 2022 cap was set in April, an increase of over £650 in the January predictions comes as a fresh shock.
“The cost of living crisis was already top of the news agenda as more and more people face fuel poverty - this will only compound the concerns.
“Many may consider the changes made by Ofgem to the hedging formula, which have contributed to the predicted increase in bills, to be unwise at a time when so many people are already struggling.”
However, he also defended Ofgem’s decision, which will hopefully lead to lower bills in the second half of next year.
This will happen because Ofgem is making it easier for energy suppliers to recover their costs. By doing this, fewer suppliers will fail - and the cost of those failures will not need to be passed on to customers.
The price cap forecasts from Cornwall show bills reaching £4,427 in April, before finally dropping slightly to £3,810 from July and £3,781 from October next year.
Ofgem said: “The wholesale market continues to move extremely quickly so no forecast for next year is at all robust at this stage and will therefore have very limited value, especially for consumers who must always be the main priority.
“We cannot stop others from making predictions but we would ask that extreme caution is applied to any predictions for the price cap in January or beyond.”
Citizens Advice Scotland’s Social Justice spokesperson Stephanie Millar said: “These soaring energy prices simply aren’t sustainable for household budgets already at breaking point due to the cost of living crisis. Many are going to be forced between heating their homes or feeding themselves this winter.
“The most important thing people can do is seek advice. The Citizens Advice network offers free, impartial and confidential advice and we get real results for people - on average those who see a financial gain through our advice are over £4,400 better off.”
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