According to new analysis, energy bills for UK households could double following Russia’s invasion of Ukraine. Collectively, this means that UK households will face a £38bn hit to their budgets. The research, which was conducted by Aurora Energy Research, has confirmed that such an increase in the cost of heating and lighting homes in 2022-23 will be the equivalent of a 6p rise in the basic rate of income tax.
According to Dan Monzani, UK managing director at Aurora Energy Research, rising wholesale gas and electricity prices since Russia’s invasion of Ukraine are “baking in” a higher cap for next winter.
Monzani estimated that for the households connected to the power grid, such an increase in the cap would push the likely cost of aggregate electricity and gas consumption to £74bn in 2022-23, some £38bn more than in 2021-22.
“That’s the equivalent of 6p on the basic rate of income tax, but with the money never getting to the Treasury,” Monzani told the Financial Times. “It’s a hugely substantial impact, especially on lower-income households.”
Will the government provide further help?
Earlier this year, rising wholesale energy prices prompted energy regulator Ofgem to raise the average price cap from £1,277 to £1,971. However, it’s now clear that even this sharp rise in the energy price cap will be insufficient and that a further price cap hike in the autumn is “almost inevitable”.
Due to the fact that the government announced a raft of measures to help struggling households last time the energy price cap increased, some industry experts believe that the chancellor will use his spring statement to set out further measures.
Recently, Downing Street has sought opinions from the business department on how further pressure could be alleviated. They recommended doubling the £200 loan and delaying the point at which households start repaying the money.
However, although the government continues to look at ways to help those suffering, the government is currently playing down the idea that further relief could be offered. This is because the energy markets remain turbulent and the next change in the price cap will not be announced until August and will not take effect until October.
What can I do right now?
Although the energy price cap is due to rise by 54% in a couple of weeks, experts still recommend that you stick with your current supplier rather than running an energy comparison and switching supplier. This is because the best energy deals available from the UK’s best energy suppliers cannot currently beat the energy price cap.
However, within the next month, the government’s £9.1 billion support package will start to kick in. From April, around 20 million households in council tax bands A-D (which includes 95% of rented properties) will benefit from a £150 council tax rebate to help with their energy bills. Then, in October, every household in the country will receive a further £200 rebate in the form of a loan.
If you’re still struggling with your energy bills and you believe you’ll be unable to make payments, then it’s recommended that you speak with your energy supplier. We also recommend that you follow these three great tips from Martin Lewis.
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