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Will the UK end up paying people’s energy bills as the price cap rockets?

Will the government have to step in and pay people’s energy bills? That seems the logical question to ask, as forecasts now put bills at an unmanageable level for many households in the near future.

The news on gas and electricity bills just keeps getting worse and the latest energy price cap forecasts have signalled serious pain ahead.

The most pressing one comes for October, when the energy price cap for the average household is expected by analysts Cornwall Insight to rocket from £1,971 now to £3,582.

In January, the price cap is then forecast to jump again to £4,266 and three months later it is tipped to reach £4,427.

Awful autumn: After a long hot summer, painful energy bill rises are forecast just as the colder weather kicks in – with the energy price cap tipped to almost double in October 

To put this in context, before the rise in April this year, the price cap stood at £1,277.

This is an absolutely astronomical increase in people’s energy bills: the average household will go from paying £106 a month in January this year, to £355 per month in January 2023.

Of course, what you will end up paying will be different and depends on the size of your household, your home and your energy usage (something I suspect most of us will be cutting back on come autumn).

To help people get a grip on what they may end up paying, we looked at different household bill levels in our guide to how the price cap rises could affect you.

You can also do the maths yourself, if you are currently on a standard variable rate energy price cap tariff: take your current annual projected bill and multiply it by 1.82 to work out the October impact and 2.16 to get January’s forecast rise.

For example, my current energy price cap tariff annual projected bill is £3,600. On October’s forecast, this will rise to £6,552, while on January’s it will increase to £7,776.

That works out as £546 per month from October and £648 from January.

Before the April price cap rise, which came just weeks after our fixed deal ran out, we were paying about £150 a month.

In the discussions about what on earth to do to help people with their bills, talk often turns to those who will really struggle and the better off who will have to ‘cope’ with the energy bill spike.

I certainly fall into the latter category, but even from a position of being very fortunate financially in relation to many, the idea of finding an extra £500 a month for energy bills this January compared to last definitely stretches the sense of the word ‘coping’.

If I feel like that, it’s no wonder there is currently a furious backlash against rising energy prices that is rapidly gathering steam.

If you are on a price cap now and the forecasts are correct, which I’m praying they are not, then your bills will double in January next year.

This will be exceptionally painful for many and simply impossible for some, hence the rise of campaigns such as Don’t Pay, social media storms about reducing your direct debit, and dubious advice on only paying what you can afford, how firms supposedly can’t disconnect you, and even installing your own meter.

We cover Don’t Pay here and warnings on how it could damage your credit rating, it’s worth noting your direct debit is spread out over the year so you overpay in summer to help with winter, and I’d be very careful about believing all the stuff you read on social media.

But underlying all this is a real issue: lots of people will really struggle to pay these bills or simply not be able to and forced into huge debts.

We need to get ahead of this problem and work out what as a nation we are going to do.

One proposal put forward by Ed Davey, the Lib Dem leader, was a form of energy furlough scheme, where the Government effectively cancels the October price hike and pays that cost for everyone instead.

When Davey put forward the plan on Monday it was expected to be £1,400 for the average household, whereas Tuesday’s forecasts put the sum at £1,600.

The criticism is that this would cost a bomb, at about £36billion, and involve helping people regardless of earnings or wealth – not just the poorest.

Davey’s response was that a broader windfall tax could recoup about £20billion and that help would benefit the poorest most and gain support by covering everyone.

He said: ‘These rises hit poorer households twice as hard as richer ones. So, this will help poorer households twice as much. It is dramatically progressive. And it is simple – it means you will have no one left without help, including those households where landlords may not pass on discounts.’

> How to save money on energy: What you need to know about your bill and energy-saving tips that work 

Effectively paying people’s energy bills to the tune of that amount of money sounds crazy, but it’s a similar effect to moves we could have made to cap prices if our energy system was still nationalised and at least Davey is trying to come up with an idea to tackle the car crash we know is coming.

Such ideas are notably absent elsewhere. Perhaps it is time for all our political leaders of different hues to get together and start thrashing out a plan now that they can all agree on, as this problem goes beyond party politics.

We can’t wait for September’s Tory leadership result, we need Boris Johnson, Liz Truss, Rishi Sunak, Keir Starmer, Angela Rayner and Ed Davey round a table now trying to come up with something.

That won’t happen, so we will probably just get more dithering.

The question is whether at the end of it we will end up with a big chunk of at least some people’s energy bills being paid by the state?

Are green energy plans to blame?

The shift to renewable energy has come under heavy criticism from some quarters as the energy crisis hits.

As Britain has sought to decarbonise its energy and move towards greener sources of power we have closed down coal-fired power stations.

This is better for the environment but has created an energy security issue, as we are much more reliant on gas than we once were to generate electricity as well as heat our homes.

The Russian invasion of Ukraine has sent gas prices soaring even higher and although Britain does not rely on Russian gas to the same extent as many of our European neighbours, such as Germany,  it must be bought on international markets and the price for all gas has spiked.

There are two sides to the green energy argument: one says we have moved too quickly to renewables and sacrificed energy security, the other says that if we had moved faster to get greater renewable energy capacity we’d have less of a problem.

This is the subject for a column on another day – and I haven’t researched the issue enough and do not have the space to do it justice here now.

However, I do believe that using cleaner energy is important but also that governments here in the UK and abroad have made a hash of the transition and been too complacent about energy security.

Among interesting articles on the green energy debate that I have read recently are these two:

> James Murray of BusinessGreen: How the net zero sceptics’ medieval arguments are being overwhelmed by a very modern reality 

> StatsJamie: High energy prices – the UK strategy towards foreign gas to blame