Household energy bills could rise by £500 as Hunt cuts support

Crisis facing family finances will worsen as result of change, warn poverty campaigners

HOUSEHOLDS face paying an extra £500 for their energy next year after the Government cut the level of taxpayer support.

Jeremy Hunt is increasing the maximum average bill under the Government’s “energy price guarantee” from £2,500 to £3,000 in April, meaning the taxpayer will have to spend less on subsidising the cost to consumers.

The average price was previously frozen at £2,500 for two years. The Chancellor claims that the change will save taxpayers £14billion.

Vulnerable households will receive extra support as the Government attempts to strike a balance between cutting the Treasury’s liabilities and continuing to protect those in need.

The state has stepped in following a surge in wholesale energy prices, worsened by Russia’s war in Ukraine, which risks tipping millions into fuel poverty.

However, campaigners warned that the crisis facing struggling households would deepen as a result of the changes.

Speaking in Parliament, Mr Hunt said: “One of the biggest worries for families is energy bills. From April, we will continue the energy price guarantee for a further 12 months at a higher level of £3,000 per year for the average household.

“With prices forecast to remain elevated through next year, this will still mean an average of £500 support for every household.”

Typical annual bills of £2,500 under the existing guarantee compare with pre-crisis levels of £1,277 in October 2021.

The energy price guarantee was put in place by Liz Truss in one of the first acts of her short-lived premiership, amid warnings that annual bills could climb above £5,000.

Mr Hunt has reduced the level of support offered after taking charge of the nation’s finances amid the turmoil caused by Ms Truss’s mini-budget.

The support will last until next April, rather than next October as previously planned, at a cost to the taxpayer of about £37.4billion.

Typical bills from April could be lower than £3,000 if wholesale prices fall, although expectations at present do not suggest that.

The guarantee applies to all households and those on means-tested benefits will receive extra cost of living payments next year worth £900.

Pensioners will receive £300, while people on disability benefits can expect payments worth £150.

However, National Energy Action, the fuel poverty charity, said that the breathing space for struggling households would be “shorter lived and less helpful”.

Adam Scorer, its chief executive, said: “Sadly, this means there is now no end in sight to the energy crisis for struggling households. For most, it looks as if it will get even harder.

“Boosting welfare payments and the targeted support that has been announced for energy bills will help some of the poorest households and at-risk groups.

“That’s important, but there are big gaps in these measures, especially for low-income households not on means-tested benefits.”

He added that other vulnerable

‘Sadly, this means there is now no end in sight to the energy crisis for struggling households’

groups, such as people with medical conditions or carers, were “at acute risk of being left out in the cold unless they are supported by local authorities”.

Under the energy price guarantee, the state limits the unit rate that energy companies can charge households for gas or electricity.

Individual bills will vary depending on consumption.

Projections indicate that the price cap on energy bills could be as high as £3,640 for a typical household in April, meaning the state would be paying about £640 per household to limit average bills to £3,000.

Martin Young, an analyst at Investec, said: “Our April [price cap] estimate now stands at £3,640, and our July estimate at £3,107.”

Earlier this month, analysts at Goldman Sachs predicted that benchmark European gas prices would slump from about €125 (£109) per megawatt hour to €85 in early 2023, less than a third of the €300 reached in August.

At the time, Henri Patricot, an analyst at UBS, said: “The influx of US liquefied natural gas amid decreased gas demand led to the European gas market being oversupplied, pushing day-ahead prices into the negative territory briefly.

“Unseasonably warm weather delayed the heating season.”