IMF warns against trying to prevent rising energy bills

MINISTERS should allow heating bills to soar to encourage energy conservation and accelerate the push to net-zero carbon emissions, the International Monetary Fund (IMF) has claimed.

The global lender of last resort urged governments not to subsidise household energy costs, as it insisted that usage must come down amid fears that Vladimir Putin will cut off gas supplies this winter.

It said that artificially reducing energy bills would only make the looming crisis worse by increasing the risk of shortages, as well as encouraging reliance on fossil fuels.

Oya Celasun, the IMF’S Europe assistant director, said: “Governments should let retail prices rise to promote energy conservation while protecting poorer households.”

European countries have rushed to prop up households facing a huge shock to incomes from the surge in energy bills.

However, cushioning the blow to family budgets means many are less likely to cut back on energy usage. That would stop demand falling back in line with supply, keeping prices higher for longer and helping to fund Mr Putin’s war machine.

Ms Celasun added: “They should allow the full increase in fuel costs to pass to end-users to encourage energy saving and switching out of fossil fuels.

“Policy should shift from broadbased support such as price controls to targeted relief such as transfers to lower-income households who suffer the most from higher energy bills.”

She said that mitigating the hit to households “keeps global energy demand and prices higher than they would otherwise be”.

The IMF called for support to be targeted at the most in need after finding that living costs for the poorest fifth of households in the UK are on course to rise by twice as much as for the wealthiest, one of the biggest gaps in Europe.

Oil and gas prices have rocketed following the outbreak of war in Ukraine, with households bearing the brunt of the increase. The UK, US and EU have implemented embargoes on Russian oil while the Kremlin has turned the screw on Europe by cutting gas supplies.

Analysts warn that the energy price cap will soar to as much as £3,616 in January and remain above £3,000 a year until at least 2024.