Rising energy bills ‘difficult’ for people, Andy Burnham says

Josie Clarke, Press Association Consumer Affairs Correspondent

Prime Minister Andy Burnham has said rising energy bills are “difficult” for people after Ofgem raised its price cap by 4% to a three-year high and analysts forecast a further 9% hike from January.

Speaking to reporters from a supermarket in London, the Prime Minister said: “It’s difficult for people and I recognise that.

“But it’s why, within days of taking office, I announced that we would remove VAT off electricity bills to give people that little bit of help.

“That kicks in from October.

“We know the price cap will have an impact, but it is what we can do right now.

“We’ll continue to look as we go forward at how we get energy prices down in the long term, and that’s what we need to do too.”

The regulator said its price cap will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas if this level was sustained for a year.

The increase reflected higher wholesale gas prices as a result of the ongoing conflict in the Middle East, with volatile global markets remaining the dominant driver of price changes.

In a further blow for households, analysts at Cornwall Insight released their latest forecast on Wednesday for a further 9% increase to the price cap in the new year.

This would put an average January bill up to £1,872 a year, £149 higher than October’s £1,723.

Neil Kenward, Ofgem’s director-general for markets, said: “High international gas prices are continuing to drive energy costs in the UK.

“We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.

“Savings are available by choosing a fixed tariff, which are available at £100 or more below the October price cap, and many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times.

“It’s also worth considering different payment methods, with prepayment customers paying the lowest price cap rates, and it could save consumers an average of about £45 compared to direct debit.”

Consumer groups and campaigners said the removal of VAT has done little to offset the rising price of energy for households.

Citizens Advice chief executive Dame Clare Moriarty said: “Today’s price cap rise pushes energy prices to a three-year high. It’s another sign of the relentless erosion of living standards across the country: energy bills are simply too high, prices leapfrog incomes and debt levels continue to grow.

“The Government has already taken positive action to cut levies and VAT on electricity, but the impact of the conflict in the Middle East means people still face rising costs. We need further bold action to protect those most at risk of being trapped in cold, dark homes this winter.

“The Government must commit to funding a reformed energy support scheme for those who need it most, like single-parent families and disabled people.”

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “As with previous rises, it is the price of gas driving this latest increase. Every unit of gas used will be significantly more expensive than last winter and more than 150% higher than at the end of 2020.

“Price rises fall hardest on the households who can least afford them, with millions forced to pay more for the same energy or ration the energy they use even further.

“Cutting VAT on electricity and last year’s extension of the warm home discount was a start, but ministers need to go further and faster in helping people.”

The latest price cap is based on Ofgem’s updated definition of a typical consumer, which came into effect from July to reflect falling household energy use.

It would be the equivalent of £1,941 per year based on its previous calculations, up from £1,862 currently.

The increased October cap, which will remain in place for three months, will come into force as households start to increase their energy usage further by using their heating more regularly, adding to bills.

Energy Secretary Miatta Fahnbulleh said: “Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran war.

“Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space.

“This has limited the rise in the price cap and follows the £150 in costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.”

Shadow energy secretary Claire Coutinho said: “Labour promised to cut energy bills by £300, but they have gone up by nearly £400 instead.

“Our cheap power plan would cut energy bills for households and businesses by scrapping Government taxes and levies on bills, and it wouldn’t cost the taxpayer a penny. We have to put cheap energy first.”

Ned Hammond, Energy UK’s deputy director for customers, said: “This latest increase is in line with the predictions and any such rise is always more worrying over the winter months when customers naturally use more energy.

“Coming off the back of a significant hike over summer, this further intensifies the challenges faced by customers struggling to afford their bills.

“As well as measures to improve targeted support, the Government needs to assess how to bring bills down over the longer term.

“The impact the conflict in the Middle East has had on gas prices underlines why we need to move to using more of our own sources of clean energy.

“But it’s equally true that we need to look at a fairer way of funding the policy and system costs that are also driving bills higher.”

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