Chancellor Jeremy Hunt was under pressure on Monday to use next month’s Budget to scrap plans to raise the Government’s cap on household energy bills to £3,000 a year from April.
Under the Treasury’s current plans, typical household energy bills are set to jump from £2,500 to £3,000 in April.
Although that will protect millions of families from an even bigger rise to £3,280 after Ofgem announced its latest official energy price cap this morning, analysis from the regulator showed how prices have fallen sharply since the start of the year.
As wholesale gas prices drop across Europe, the new Ofgem price cap has come down from a peak of £4,279 in January and is forecast to fall even further to nearer £2,000 in the second half of this year.
Before the Government stepped in with its own energy price guarantee last October, the limit on people’s energy bills was set by Ofgem. With the picture on energy costs improving, critics of the Government called for the Chancellor to abandon the £500 rise in the Government’s energy price guarantee from April, arguing it would further squeeze households already battered by the cost-of-living crisis.
Labour’s shadow chancellor Rachel Reeves told Sky News: “Bills should not be going up in April. Under the Government plans, bills will go up to £3,000 on average from April.
“We have set out how we can keep those bills at an average of £2,500, still very high, but it means no further increase. And we would do that by properly taxing the windfall profits, the windfalls of war, that the big energy companies have made and redirect that money to help families, to help pensioners and also to help businesses.”
Liberal Democrat leader Sir Ed Davey said the Ofgem announcement “confirms the Government could easily afford to reduce energy bills in April instead of increasing them”. He added: “Ministers must listen to our calls for an energy rescue package to save families and businesses from this cost-of-living cliff-edge, funded through a proper windfall tax.”
As well as the rise of £500 from April, households are also set to lose out on the £400 energy bills support scheme put in place by Rishi Sunak last May when he was chancellor. The last monthly payment goes out to households at the start of next month.
Ofgem chief executive Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the energy price guarantee.
“This means, that on current policy, bills will rise again in April. However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we have seen in the energy markets over the last 18 months may be starting to ease.”
The Treasury did not immediately respond to a request for comment.
