The Daily Telegraph

Energy bills could hit £5,000 by spring after support scheme cut

- By Matt Oliver

MILLIONS of middle-class households’ energy bills could reach £5,000 a year next spring after Chancellor Jeremy Hunt dramatical­ly cut back plans for support.

In a bid to rein in spending, government support for energy bills will now only extend to all households until April. After that point, a less expensive version targeted at “those in need” will take effect.

Under the original “energy price guarantee” all households were to have their bills subsidised until October 2024, with a typical family’s costs limited to about £2,500 per year.

The changes mean millions of households will now be exposed to surging prices again in the spring.

Households will still be protected by the energy price cap but forecasts for April vary wildly. Investec currently predicts it will increase to £3,900 per year, while RBC Capital Markets expects £4,700 and Auxilione £5,000.

Winter bills are already nearly twice as expensive as last year, when the price cap was set at £1,277. Meanwhile, the chief executive of the National Grid has warned families of the possibilit­y of blackouts during “really, really cold” evenings early next year.

Speaking at an event organised by the Financial Times, John Pettigrew said in a “worst case” scenario power

would have to be shut off in parts of Britain “probably between 4pm and 7pm on those weekdays when it’s really, really cold in January and February”.

The Grid has already warned of the possibilit­y of rolling power cuts if generators fail and extra gas cannot be sourced from Europe.

Government support has been reformed as the Chancellor seeks to balance the budget after moves in borrowing costs created a hole in public finances. The energy price guarantee, as it was originally conceived, was predicted to cost £60billion in its first six months alone, with the two-year cost potentiall­y reaching up to £200billion.

The decision to scale back the support was welcomed as “prudent” by think tanks including the Institute for Fiscal Studies (IFS) and the Resolution Foundation.

Paul Johnson, director of the IFS, added: “It was always wrong to promise an untargeted, universal, massively expensive subsidy for two years.”

Mark Littlewood, director general of the Institute of Economic Affairs, said the original price guarantee had been “unnecessar­ily expensive… representi­ng the single biggest welfare scheme in British history”.

“It is absurd to subsidise wealthy households to keep heating their swimming pools,” he added.

However, Karl Thompson, of the Centre for Economics and Business Research, warned that reversing support “could lead to a cliff edge and be a substantia­l risk to household finances, worsening and lengthenin­g the recession that we expect to soon unfold”.

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