26 August, 2022 Open access
26 August, 2022 Open access
It's clear the new Prime Minister will need to act to tackle the impact of the price rises that are coming, says energy regulator
It's clear that the new Prime Minister will need to act to tackle the impact of energy price rises, Ofgem has said this morning as it confirmed the new energy price cap from October 2022.
Announcing that the price cap will increase to £3,549 per year for dual fuel for an average household from 1 October 2022 - an 80 per cent increase on the current cap of £1,971 - Great Britain’s independent energy regulator said -
'... the increases reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.'
Jonathan Brearley, CEO of Ofgem, said -
'We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make ... 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. 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.'
In response to the announcement of the new price cap, the End Fuel Poverty Coalition has said -
'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. We need emergency financial support, especially for the most in need. But we also need reform to Britain’s broken energy system as well as increased support for energy efficiency measures and homegrown renewables.'
With the Institute for Fiscal Studies warning that the cost of maintaining the household support package will rise by £14bn in light of the new cap, Katie Schmuecker, Principal Policy Adviser for the Joseph Rowntree Foundation, said that it's 'simply unthinkable' that the new price rises can go ahead without further government intervention on a significant scale -
'To force the burden of rising wholesale energy prices onto households will plunge many into destitution. Millions more will face the threat of bills they simply cannot pay, homes they cannot heat and stomachs they cannot fill.
It is the job of government to decide how the burden is fairly shared between families, businesses and the public finances. Whoever occupies number 10 next will be remembered for who they protect - they must make sure energy doesn’t become a luxury only the wealthy can afford.'
The 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 ... 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.'
As a result of the price cap change, the National Institute of Economic and Social Research predicts an increase in CPI inflation in October to 12.5 per cent, rising to more than 14 per cent in January 2023. Warning of 'incredible hardship' this winter, energy analysts Cornwall Insight predict that the energy price cap will reach £5,386 in January 2023 (and £6,616 in April).
While the government has not yet responded formally to Ofgem's announcement, Work and Pensions Secretary Thérèse Coffey has tweeted the front page of today's Daily Mail with the headline 'Truss: I'll get you through the energy bill crisis'.
Meanwhile, First Minister of Scotland Nicola Sturgeon has said that the price cap increase 'cannot be allowed to go ahead', and Wales' Social Justice Minister Jane Hutt has said that the 'continued inaction by Westminster carries the real risk of consigning the people of the UK to a decade of poverty'.
For more information, see Ofgem updates price cap level and tightens up rules on suppliers.
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