Rising energy bills put millions of UK households at risk of winter catastrophe

 

Rising energy bills put millions of UK households at risk of winter catastrophe

 

Experts say 80% price cap increase will plunge people into destitution and cause avoidable deaths

Charities said the rise would completely ‘wipe out’ the incomes of poorer households.

 

Richard Partington, Rowena Mason and Alex Lawson

Sat 27 Aug 2022 00.07 BST

https://www.theguardian.com/money/2022/aug/26/rising-energy-bills-millions-uk-households-risk-winter-catastrophe-price-cap

 

Millions of households are bracing for a winter catastrophe of rising energy bills that experts say will plunge people into destitution and cause an increase in avoidable deaths without urgent government support.

 

After Britain’s energy industry regulator confirmed an 80% rise in the consumer price cap from October that will take a typical household’s gas and electricity bill to £3,549 a year, there were stark warnings about its potentially devastating effects.

 

Charities said the rise would completely “wipe out” the incomes of poorer households, leaving millions with the threat of bills they cannot pay or the choice between heating and eating this winter.

 

Highlighting the damage to whole sections of the population, analysts at the Joseph Rowntree Foundation said single parents would be forced to hand over almost two-thirds of their income after housing costs to pay energy bills.

 

The poorest single adults would, they said, see their finances wiped out by “stratospheric” energy bills representing 120% of their income after housing costs, leaving many destitute.

 

Condemning inaction by ministers, the consumer champion Martin Lewis warned “lives will be lost this winter”.

 

The latest rise announced by Ofgem highlighted once again a power vacuum at the heart of government as ministers await the conclusion of the race to replace Boris Johnson as leader of the Conservative party.

 

The Conservatives were in disarray over their response to the price cap on Friday, which will mean typical bills will have trebled from a year earlier.

 

Nadhim Zahawi, the chancellor, suggested people should think about reducing their energy use, but his likely successor, Kwasi Kwarteng, said he was opposed to giving such advice to consumers.

 

Liz Truss, the frontrunner to be prime minister, also refused to spell out what she would do to help households beyond saying she would “ensure people got the support they needed”, even though Johnson told broadcasters that the next government would “plainly” have to increase cash “handouts”.

 

The price cap was raised to £1,277 last October and now stands at just under £2,000 after increases this spring. The Russian invasion of Ukraine further added to a dramatic global increase in wholesale oil and gas prices.

 

Peter Matejic, a chief analyst at the Joseph Rowntree Foundation, said of the October increase: “In all my years as an analyst, I haven’t double-checked a piece of analysis as much as this one because it is so staggering, it feels incorrect.

 

“It is impossible to think a care worker or a shop assistant will have to scramble to find hundreds more pounds to pay for their heating or that the entirety of someone’s income for a whole year will be less than their energy bill.”

 

Criticising Truss for failing to come up with a plan to tackle “catastrophic” energy price rises, Lewis told BBC Radio 4’s Today programme: “If we do not get further government intervention, on top of what was announced in May, then lives will be lost this winter.”

 

The announcement comes as households attempt to budget for a tough winter, with inflation already above 10% driven by the soaring cost of food in shops and record petrol prices. The Bank of England has forecast the latest rise in energy bills this winter will send inflation to a peak above 13%, while some economists forecast it could climb to 18% from January.

 

The next cap will be introduced in January. The energy consultancy firm Cornwall Insight on Friday raised its forecasts for that announcement to £5,387, from a previous prediction of £4,650, and increased its estimate for the April cap to £6,616, up from £5,341.

 

Combined with forecasts for next January, the Resolution Foundation said bills were set to be about £2,277 higher than last year at £3,749 – extra money it said people cannot afford.

 

Torsten Bell, the chief executive of the thinktank, said: “Winter energy bills are set to average around £500 a month, while prepayment customers will need to find over £700, more than half their disposable income, to keep the heating on in January alone. These costs pose a serious threat to families’ physical and financial health.”

 

Ofgem said it would not give projections for the January measure because the market remains “too volatile” but warned prices “could get significantly worse through 2023”. The new cap will affect 24m households – about 85% of the population.

 

That number includes about 4.5 million prepayment meter customers, who will pay on average an additional £59 a year.

 

Jonathan Brearley, the chief executive of Ofgem, told Channel 4 News on Friday night that the regulator had had to make “difficult trade-offs” in setting the new price cap. “[It] was designed to do one thing, and that was to make sure that unfair profits aren’t charged by those companies that buy and sell energy. And, right now, those profits in that market are 0%,” he said.

 

“What it can’t do is it can’t say given the cost of the energy that we can force companies to get from customers less than it costs to buy the energy that they need, because otherwise they simply can’t buy the energy for those customers.”