UK consumers will see an 80% rise in their energy bills this winter, British energy regulator Ofgem announced on Friday. Next year could bring even higher prices, it warns.
With Ofgem’s raising of the price cap to £3,549, prospects for British households and small to medium-sized businesses are looking increasingly bleak. The increase reflects, so the regulator argues, the continued rise in global wholesale gas prices that began with COVID-related lockdowns and was pushed to record highs as Russia slowly cut gas supplies to Europe following EU-imposed sanctions.
Given that western leadership is not willing to mollify its stance towards Russia, which saw heavy sanctions in response to its escalation of the war in Ukraine, prices are expected to inflate even more throughout 2023; up to £4,000 in January and—according to the most pessimistic projections—up to £6,000 in the spring.
Compared to other European countries’ households, British ones could soon become top of the class in who forks out the most for their energy. A rise in gas prices would also be factored into the cost of consumer goods, further adding to the 10% inflation the UK is already contending with.
The regulator has therefore called on the British government to come up with solutions and provide “urgent” aid in the midst of what is fast becoming an unprecedented cost-of-living crisis, which would have a “massive impact” on British households.
Ofgem Chief Executive Jonathan Brearley said that “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.” Brearly noted that the elevated cap made energy suppliers only a “modest” profit on energy sales to households; unlike energy producers, he added, most distributors were currently not making any profits.
The country’s Chancellor (the equivalent of a finance minister) Nadhim Zahawi, has meanwhile acknowledged that the price cap is causing stress and anxiety for many people, and that even those earning £45,000 a year may need support.
Options currently under consideration are an increase in benefits and a loan scheme for energy suppliers to stop them having to pass costs on to consumers. Zahawi has not ruled out a freeze on the price cap, though he expressed concern that such a broad measure would also benefit those who could afford higher energy costs. He prefers a targeted approach instead.
As for small businesses, he added that a number of measures, including temporary reductions to VAT, business rates, or green levies, were being considered, in the hopes these would stave off a “longer-term scarring effect on the economy.”
Zahawi, who holds an opinion different from those of his cabinet colleagues, further emphasized that citizens “should all look at our energy consumption,” arguing that the country needs to show resilience as it continues to help Ukraine resist the Russian invasion. “Putin has worked out that he can use energy as a tool to hit back at us,” he said, adding that “we are going to need to send a message back to Putin that this is not going to soften our resolve.”
The announcement comes only days before Prime Minister Boris Johnson’s successor is announced. Johnson has thus far undertaken little action in resolving the crisis, leaving this farrago for the next prime minister to untangle instead.
Liz Truss, the current forerunner to replace him, wrote in a Friday article for the Daily Mail, that if she is elected leader of the Conservative Party and prime minister, she “would take decisive action on entering No. 10 [in Downing Street] to provide immediate support,” and “tackle the root causes of these issues.”
“To those of you feeling the squeeze, my message is clear: I will ensure support is on its way and we get through these tough times,” she promised.
With some, such promises and assurances fail to assuage fears however. “Today’s Ofgem price hike is like a dagger to the hearts of millions of people up and down the country,” says Simon Francis, co-ordinator of the End Fuel Poverty Coalition which represents over 60 charities, local authorities, and campaign groups. “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,” he added.
Other grassroots initiatives are meanwhile springing up. One of these is “Warm This Winter,” a new campaign backed by dozens of organizations. Decrying the fact that “people in this country are forced to ride buses or visit public spaces just to keep warm,” it has launched a petition calling for urgent government action to help people cope with heating bills.
Another campaign, “Don’t Pay UK,” which The European Conservative reported on earlier, has meanwhile added more Britons to its ranks; about 123,000 now pledge not to pay their energy bills come October.
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