‘Expect high energ y bills all the time’

HOUSEHOLDS face permanently higher energy bills due to the shift to green power, the governor of the bank of England has warned.

Switching from ‘more polluting’ fossil fuels such as coal will increase demand for ‘less polluting’ ones such as gas, Andrew bailey said.

This will push up energy costs and lead to a ‘more permanent higher level of prices’, he said.

Mr bailey’s comments came a day after the bank of England predicted that annual inflation could hit 5 per cent next April, the highest level in a decade.

inflation is already 3.1 per cent, well above the bank’s 2 per cent target. This is mainly because of soaring energy bills amid a shortage of gas and high demand for oil, after manufacturing activity picked up following the Covid lockdowns.

Mr bailey said: ‘it is possible that some of what we’re seeing with gas prices at the moment is already climate change having an effect if there is a switch out of coal, which we want to see. A part of it would be a more permanent higher level of prices.’

on Thursday the bank of England defied expectations when it refused to lift interest rates.

An increase in rates from their current record low of 0.1 per cent would help to tame rising costs by encouraging people to save rather than spend. but the bank is worried that bumping up rates too soon will stunt economic recovery.

Yesterday, however, Mr bailey repeated his comments from Thursday that a rate rise would come soon. ‘we expect interest rates to rise,’ he told bbC’s Radio 4 Today programme. ‘we’ve been very clear and that’s deliberate.

‘if you ask the question of “why haven’t you done it now?” the answer is all to do really with the labour market in my view.’

Mr bailey explained that he was waiting to see data on what happened when the furlough scheme ended in September, and whether the one million workers who were still using the government support as it closed were working again.