Millions of households face a ‘cliff-edge’ of soaring energy bills next year after Jeremy Hunt drastically cut short the Government’s support scheme from two years to six months.
The new Chancellor said yesterday the scheme, which aims to keep average annual household bills below £2,500 amid soaring energy prices, will be replaced in April.
Instead, he promised ‘targeted help’ for the poorest families. However, analysts have warned the move could see average bills double to more than £5,000 for some households.
Meanwhile, consumer champion Martin Lewis, using figures from Cornwall Insight, forecast energy bills to rise by 73 per cent to around £4,350-a-year for an average household in April.
Last night, Mr Lewis, who founded consumer site MoneySavingExpert, warned: ‘If these are in the right ballpark, the promised ‘targeted help’ will need to be targeted up into middle incomes for people to get through this. Especially if it stays at those levels for the next winter.’
Mr Hunt made his announcement amid the reversal of £32billion worth of tax cuts to reassure the markets after the turmoil sparked by last month’s ‘mini-Budget’.
In a warning of a possible return to austerity, he said the Government would need to make ‘eye-wateringly difficult’ decisions to balance the books.
Millions of households face a ‘cliff-edge’ of soaring energy bills next year after Jeremy Hunt drastically cut short the Government’s support scheme from two years to six months
Analysts have warned average household energy bills could hit between £3,923 and £5,000 next April, according to forecasts. The Government will continue to cap prices at £2,500 until April, but today Jeremy Hunt said the scheme would not continue beyond, with ministers instead opting for ‘targeted’ help for the poorest families
Speaking in the Commons, he also refused to rule out expanding windfall taxes on oil and gas giants’ profits to raise more money to plug the black hole in the public finances.
The move would be another humiliating U-turn for Prime Minister Liz Truss, who last month ruled out imposing more windfall taxes, saying it would hinder investment in the economy.
But Mr Hunt told MPs: ‘I’m not against the principle of taxing profits that are genuine windfalls. Nothing is off the table.’
Treasury officials were yesterday scrambling to devise a new price guarantee scheme, which is likely to be means-tested.
Mr Hunt made the announcement amid the reversal of £32billion worth of tax cuts to reassure the markets after the turmoil sparked by last month’s ‘mini-Budget’
The current regime had been due to apply to all households well into 2024. But it will now end in April.
Ofgem, the regulator, has yet to set a cap for April amid uncertainty about what will happen to the wholesale cost of gas.
However analysists say bills could top £5,000. One consultancy, Auxilione, told the Times that its forecast shows average household bills could hit £5,078 in April.
The Resolution Foundation think-thank predicts the figure could be around £4,000. while banking group Investec put their forecast figure around £3,923.
Meanwhile, The Resolution Foundation estimated curtailed support could save up to £40billion next year (2023-24).
Industry estimates suggested the previous two-year scheme could cost anywhere between £70billion and £140billion, depending on the wholesale price of gas.
Mr Hunt pledged that ministers would continue to provide support for the most vulnerable in society. ‘The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need,’ he said.
The Chancellor added that support for businesses will also be more targeted.
Labour went on the attack after the announcement. Miss Truss has repeatedly criticised the party for proposing support for household bills lasting only six months as well as its calls to expand windfall taxes on energy profits.
Darren Jones, Labour chairman of the Commons business, energy and industrial strategy committee, said: ‘We’ve long called for the targeting of public funds to those who need it the most.
‘Any end to support for all bill payers should be tapered off, instead of facing a cliff-edge.’
Mike Foster, chief executive of the Energy and Utilities Alliance, said the move, ‘together with the announcement that promised tax cuts have also been withdrawn, will heap huge financial pressure on to those already struggling to pay their bills’.
National Energy Action said ‘huge uncertainty’ had been created for households and John Palmer, of elderly charity Independent Age, said: ‘Instead of ensuring stability, today only provided uncertainty.’
It comes as households across Britain could face three-hour rolling blackouts in January and February if gas stocks run low, the head of the National Grid has claimed.
John Pettigrew (pictured) said the firm, which oversees the UK’s electricity and gas networks, would need to introduce rolling power cuts on ‘really, really cold’ weekdays in January and February if the UK failed to secure enough natural gas from Europe
He said the first two months of next year were of particular concern, and a shortage of fuel for gas-fired power stations – which generate a large portion of the UK’s power – combined with slow wind speeds and lower imports of electricity from Europe would put strain on the grid
Chief executive John Pettigrew said the firm may need to introduce rolling power cuts in January and February, specifying the blackouts would occur on ‘really, really cold days’ during the week should Britain fail to secure enough gas supplies from Europe.
Speaking at the Financial Times’s Energy Transition Summit, Pettigrew warned that Britain’s gas-fired power stations, which generate a large portion of the nation’s power, are facing a considerable scarcity of fuel.
That, combined with slow wind speeds for wind turbines and lower imports of electricity from Europe, would put excess strain on the grid and could lead to drastic energy shortages, necessitating co-ordinated blackouts.
Pettigrew’s warning echoed that of the National Grid’s Electricity System Operator (ESO), which earlier this month said households and businesses might face planned three-hour outages to ensure the grid does not collapse.
But a move to implement blackouts would need approval from the Government as well as King Charles.
The risk of blackouts recalls the 1970s when strikes by miners and railway workers forced Ted Heath’s government to introduce planned power cuts to conserve energy.
Energy regulator Ofgem said British households should reduce their gas and electricity use where possible this winter to help cut costs and reduce the risk of power cuts.
National Grid meanwhile is setting up a scheme that will pay households and companies for reducing their demand during periods of limited supply.
Retired nurse, 85, says: ‘My bungalow bills have trebled’
Mary Wiedman, 85, is already paying £180 a month to heat her one-bedroom bungalow. And from April – when the Governments energy price guarantee is due to be curtailed – that cost could soar higher still
Mary Wiedman, 85, is already paying £180 a month to heat her one-bedroom bungalow. And from April – when the Governments energy price guarantee is due to be curtailed – that cost could soar higher still.
The retired nurse, right, saw her bills treble compared with last year after her former supplier went bust and the energy price cap increased.
The, widow, who has four grandchildren, has now turned off the radiators in her bedroom in order to cut costs.
Mrs Wiedman, a Tory Party member who lives near Hemel Hempstead, Hertfordshire, said: ‘Some people, especially pensioners who cannot go out and earn more money, will be unable to cope. I don’t know how the Prime Minister thinks this is a sensible solution.’
Mrs Wiedman, (pictured when younger) a Tory Party member who lives near Hemel Hempstead, Hertfordshire, said: ‘Some people, especially pensioners who cannot go out and earn more money, will be unable to cope’
