Britain’s families are set for a punishing increase in bills this winter after Ofgem confirmed an 80 per cent rise in the energy price cap – sending the average household’s yearly bill from £1,971 to £3,549 from October.
The cap announced today will come into effect for around 24million households in England, Scotland and Wales on default energy tariffs on October 1, and will remain in place until December 31, when it will be adjusted again.
The 4.5million pre-payment meter customers across Britain, who are often the most vulnerable and already in fuel poverty, will see an even more punishing increase, with their average annual bill set to go up to £3,608.
Ofgem’s chief executive Jonathan Brearley warned of the hardship energy prices will cause this winter and urged the incoming prime minister ‘to provide an additional and urgent response to continued surging energy prices’.
The regulator said the increase reflected the continued rise in global wholesale gas prices, which began to surge as the pandemic eased, and had been driven still higher by Russia slowly switching off gas supplies to Europe.
Ofgem also warned that energy prices could get ‘significantly worse’ next year. The regulator said that some suppliers might start increasing the amount that direct debit customers pay before October 1, to spread out payments, but any money taken by suppliers will only ever be spent on supplying energy to households.
Based on Wednesday’s gas prices, experts at independent energy consultancy Auxilione think the cap will reach £5,210 in January 2023 and £6,823 in April. And Philippe Commaret, the managing director of energy giant EDF, has warned that half of UK households could be in fuel poverty in January as a result of rocketing prices.
Which? has urged the Government to raise its energy bills discount by at least 150 per cent or risk pushing millions of people into financial distress. The consumer watchdog said Ministers’ financial support for all households must increase from the current £400 to £1,000 – or from £67 to £167 per month from October to March.
However, no immediate extra help will be announced by Boris Johnson’s Government, with major financial decisions being postponed until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.
The Ofgem price cap has already risen to the amounts shown in red – with predictions for further increases shown in blue
An Ofgem graphic shows changes in the components making up the direct debit level of the cap, shown for dual fuel usage
Mr Brearley told BBC Radio 4’s Today programme he knew the increase in the cap would come as ‘devastating’ news for struggling households. He called on the Government and the next prime minister to take urgent action.
He said: ‘I know this will be devastating for many families, when they hear how much their energy bills are going to go up. We have done and looked at everything we can do as a regulator to address this figure.
‘There’s a number of things we do to make sure that companies treat their vulnerable customers well. There’s a number of vulnerability schemes that we run. But the truth is this is beyond the capacity of the regulator and the industry to address.
‘So what we are saying today is, look we have 10 days now until we have a new administration, have a new prime minister and a new ministerial team. What I am clear about is the prime minister with his or her ministerial team will need to act urgently and decisively to address this.’
Mr Brearley also said the Government would need to add to the support it announced in May when bills were only expected to jump to £2,800.
‘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,’ he added.
‘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.’
He added: ‘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.’
Chancellor Nadhim Zahawi said the increase in the cap would cause ‘stress and anxiety’ for people but that the Government was working to develop more options to support households.
‘I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners,’ he said.
‘While Putin is driving up energy prices in revenge for our support of Ukraine’s brave struggle for freedom, 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.’
On Wednesday, Mr Zahawi insisted ‘nothing is off the table’ when it comes energy bills, but added that a freeze in the price cap would not deliver ‘targeted help’ for those who need it most.
Labour shadow chancellor Rachel Reeves tweeted today: ‘This is incredibly worrying and will strike fear in the heart of many families. We cannot wait any longer to act.
‘This is a national emergency. The Tories must freeze energy bills now so households don’t pay a penny more in winter.’
She also said in a statement that the Government must choose between letting families suffer, or stop the oncoming rise.
‘Today’s announcement will strike fear in the heart of many families, and force many to make unthinkable choices this winter. The Tories now face an urgent choice.
‘They can carry on letting oil and gas companies make huge profits whilst every family suffers with bills rising this winter. Or they can act now and stop the energy price cap rising, by bringing in a windfall tax on those oil and gas profits.
‘People deserve a government that can meet the scale of this national emergency – not this spectacle of a Tory leadership race or a Prime Minister that put his out of office on months ago.
‘Labour is on your side, and our fully-funded plan to freeze the price cap will make sure households don’t pay a penny more this winter, saving you £1,000. Our mission for home grown renewable energy and to insulate 19 million homes will keep bills down for the long term too.’
Liberal Democrat leader Sir Ed Davey said that rise in the cap is ‘nothing short of a catastrophe’ for millions of households.
‘The only option is for energy prices to be frozen before these rises wreak havoc on our communities. Then we need a proper plan to be put in place to bring bills down next year,’ he said.
‘As millions suffer the Conservatives do nothing. No policy from the government, no plan from Liz Truss or Rishi Sunak. They have no idea how much pain these energy prices will cause our country. They are simply unfit to govern.’
Richard Neudegg, director of regulation at Uswitch.com, said: ‘Here is the signal that the summer holidays are over. After seemingly endless predictions, the true magnitude of the October energy price cap is now clear.
‘Ofgem has rubber-stamped the letters from suppliers that will now start landing on millions of doorsteps informing customers of exactly how much they’ll need to pay for their energy as we go into winter.
‘Households will face average monthly charges of £362 based on expected usage – almost three times more than the same period in 2021.
‘Even after the £66 monthly discount currently on the table from the Government, families will need to find on average an extra £169 per month compared to last year, when many household budgets are already maxed out.
‘The energy crisis we face this winter must never be allowed to happen again. This is a failure of the wholesale market and, until that is resolved, we won’t have a long-term solution.
‘The Government has made it clear that it will not intervene further until a new Prime Minister is confirmed. As concerning as this is, there does seem to be consensus that more support will be made available, but it remains to be seen if it will be enough.
‘Until the Government acts, which we expect will be in the coming weeks, consumers are being held in a cost-of-living limbo.’
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: ‘Today’s Ofgem price hike is like a dagger to the heart of millions of people up and down the country.
‘As a result of the decision, parents will be unable to feed their children, the sick and elderly will be condemned to worsening health, disabled people will go without vital medical equipment and households will be forced into poverty for the first time in generations.
‘All the solutions lie at the Westminster Government’s door, yet it is silent in the face of this looming disaster.’
And Andrew Forsey, national director of anti-hunger charity Feeding Britain, said: ‘Unless significant additional help is offered by the new prime minister, these eye-watering prices will spring a vicious hunger trap; leaving millions of families unable to afford heating or eating.
‘Eighty years after the Beveridge Report set the framework for a welfare state that could eliminate destitution from our shores, the threat of destitution now hangs over us again like the Sword of Damocles.’
Meanwhile Sara Ogilvie, policy director at Child Poverty Action Group, said: ‘Today’s energy cap announcement will terrify many low-income families. Their budgets have been overstretched for months, and soaring prices will make it practically impossible to escape the tightening grip of poverty.
‘We know that families with children spend 30 per cent more on energy bills than households without kids – yet Government has completely failed to recognise the extra costs facing households with children. The next prime minister will be on a collision course with reality unless they increase support to reflect the scale of need, and uprate benefits in line with inflation.’
And a charity which supports the vulnerable said families are facing one of the ‘bleakest Christmases’ for years.
Rossanna Trudgian, head of campaigns and public affairs at Action for Children, said: ‘Today’s announcement, and warnings of even worse rises to come next year, makes it clear that the country is facing a national emergency. The families we support are already under enormous pressure and are now set to face a relentless wave of energy price hikes and inflation all while coping with the colder weather.
‘We are seeing more and more frightened families who are reaching crisis point. Some parents are coming to us in tears, terrified about how they are going to feed their children, with some missing rent payments so their child can have a meal – one family has even resorted to taking seats out of their car to save on fuel. Many of these families have already cut back to the bone and have nowhere left to cut.’
‘They are facing one of the bleakest Christmases in recent years. The next prime minister must provide emergency relief to struggling parents by committing to further targeted support for low-income families through the social security system. Families with children also face higher costs, so it is vital that any financial support takes into account family size and need.’
And Mike Childs, head of science, policy and research at Friends of the Earth, said: ‘Today’s news will be life-changing for millions of people. The government, and the two frontrunners to be Prime Minister, have had all summer to set out how they’ll shield households from these colossal price hikes, yet we still don’t have a credible plan.
‘Decision-makers must urgently commit to much greater levels of emergency financial support and the rapid roll-out of a nationwide, street-by-street home insulation programme targeted at those who need it most.
‘There are almost 5 million homes in England and Wales that lack even the most basic insulation measures, meaning too many households are paying through the roof to heat their homes. At this stage there’s no justifying the total absence of plans to improve the energy efficiency of UK homes, when it would help to slash energy use, reduce climate-changing emissions, and save households hundreds of pounds each year on their bills.’
Becca Lyon, head of child poverty at Save the Children, 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.’
Disabled people ‘feel like they are being punished for using more energy’, the disability equality charity Scope warned.
Policy manager Tom Marsland said: ‘After months of harrowing predictions about energy bills, today’s announcement confirms disabled people’s fears. Life already costs more for disabled people.
‘Now the cost of charging a wheelchair or using a breathing machine will have almost trebled in a year. We’ve been inundated with calls from disabled people who don’t know which way to turn and feel like they are being punished for using more energy.
‘The government must intervene now. They should start by doubling the support package, and look at bringing in discounted tariffs for disabled customers who need more energy.’
The Trades Union Congress has said energy bills will rise 35 times faster than wages and 57 times faster than benefits in the last three months of this year, after the energy price cap was hiked by 80%.
It added that while average nominal wages will rise by £1,470 in the year to October, energy bills will soar by £2,270 in the same period, leaving workers £800 worse off.
‘Nobody should have to worry about heating their homes this winter,’ said TUC General Secretary Frances O’Grady. ‘But millions are facing bankrupting bills in the months ahead.
‘Today’s energy price rise will be a 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.’
Britain’s ‘energy crisis hotspots’: Friends of the Earth have revealed how badly different areas in England and Wales will be affected by the October Ofgem price cap rise
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The price of petrol and energy bills has risen dramatically over the last year as inflation in the UK breaks through 13 per cent
Liz Truss has pledged to hold an emergency budget if she becomes PM to help with the cost of living
Rishi Sunak has also pledged measures to help with the cost of living, and will continue packages of support already introduced