Key facts
- The energy price cap is set to rise by 4% to an average of £1,723 per year from October.
- Opposition figures accuse the government of breaking promises to lower household energy bills.
- Prime Minister Andy Burnham acknowledged the upcoming rise will be difficult for households.
- The government plans to cut VAT on electricity bills from October.
- Analysts predict further energy bill increases, potentially reaching £1,872 by January.
Prime Minister Andy Burnham is facing significant criticism regarding his administration's approach to the cost-of-living crisis, particularly as energy bills are poised for another increase. The energy regulator, Ofgem, announced that the price cap on household energy bills will rise by 4% to an average of £1,723 per year starting in October.
Opposition figures have seized on the announcement, accusing the government of failing to uphold Labour's pledges to reduce energy costs. Shadow energy secretary Claire Coutinho stated that instead of the promised £300 cut, bills have actually increased by nearly £400. She advocated for a "cheap power plan" that would eliminate government taxes and levies on energy bills without burdening taxpayers.
Burnham acknowledged that the impending rise in energy costs will present difficulties for households and conceded that the planned cut in VAT on electricity bills would not be sufficient to counteract the surge. "We know the price cap will have an impact, but it is what we can do right now. We’ll continue to look as we go forward at how we get energy prices down in the long term, and that’s what we need to do too," he told reporters.
Shadow environment secretary Victoria Atkins described the upcoming increase as "outrageous" and a manifestation of "broken promises." She expressed concern that the rising bills would not only affect households but also individuals reliant on heating oil, highlighting the importance of the winter fuel allowance. Analysts are warning that the 4% rise in October follows a 13% increase in July and signals further hikes, with projections suggesting a potential 9% jump to £1,872 by January due to persistent high international gas prices.
Consultancy firm Boston Consulting Group has advised the Labour government to reduce renewable energy levies on household bills and to increase grid connections for data centers to stimulate demand and potentially lower prices. Separately, Brent crude oil prices have seen volatility, surging to $110 per barrel following strikes on Iran before settling around $85 per barrel amid progressing peace negotiations, though still significantly higher than January's levels. Energy secretary Miatta Fahnbulleh has indicated that the government might remove "policy costs" from energy bills to alleviate the financial pressure on consumers, emphasizing that energy should remain affordable.