Ministers have been urged to intervene to prevent a “winter of despair and suffering” by offering financial support to millions of households facing unmanageable energy bills.
The government is under renewed pressure to act after warnings that energy costs will remain unaffordable for the most vulnerable in society, despite Friday’s announcement of a fall in the energy price cap.
The average annual cost of gas and electricity bills will drop to £1,923 from October for the 29 million households in England, Wales and Scotland, the energy watchdog Ofgem has announced, £150 lower than the previous quarter. The change marks the first time the cap has been below £2,000 for 18 months.
Fall in household bills
However, a typical household will still pay almost double the rate for its gas and electricity than before Russia’s invasion of Ukraine triggered a global energy crisis, and prices are forecast to rise again from January.
Ofgem energy price cap: what does drop mean for households and is help available?Read more
Many will see little difference in what they pay because the £400 support from the government given to all homes last winter is no longer available, and standing charges have risen from an average of £186 a year in October 2021 to just over £300.
Charities and campaign groups have called on the government to urgently introduce a social tariff, which would cut bills for low-income and vulnerable households, charging them below-cost rates. Energy suppliers are also aligning behind the idea, with Scottish Power, E.ON and Centrica calling for reform.
Household energy debt levels
The chief executive of National Energy Action (NEA), Adam Scorer, said: “The price cap does not protect those who simply cannot afford the cost of keeping warm. That requires direct government intervention through bill support, social tariffs and energy efficiency.”
Scorer said that the government is “aware that failing to act will consign millions to another winter of despair and suffering”.
An estimated 6.3 million households will be in fuel poverty – where more than 10% of household income is spent on fuel costs – this winter, up from 4.5 million in October 2021, before the energy crisis began, according to NEA.
James Taylor, the executive director of strategy at disability equality charity Scope, urged ministers not to wait until winter before deciding to extend further help. He said: “Many disabled households can’t simply turn off nebulisers or go without energy to charge wheelchairs and hoists.
“Creating this tariff in time for winter needs to be a political priority.”
The £400 given to all homes in Great Britain last winter will not be repeated this year, the government instead making cost of living payments to about 8 million vulnerable households. This includes a £900 payment for those on means-tested benefits, £300 for pensioners and £150 for disabled people. But more is needed, say poverty campaigners.
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Campaigners want UK social energy tariff but ministers sit on their handsRead more
Gillian Cooper, the head of energy policy at Citizens Advice, said: “Increasing numbers of people we help are in a negative budget, where they simply don’t have enough money coming in to cover even just their essential bills.
“Government must step in quickly with more targeted support for the households who need it most.”
The Ofgem chief executive, Jonathan Brearley, who has admitted that the price cap needs to be reformed, said he supported a social tariff being “in the mix of the options that we might examine”. But he added: “Ultimately, that is a decision for government.”
The chancellor, Jeremy Hunt, promised to examine the case for a social tariff in last year’s autumn statement, but industry sources said the Treasury had since cooled on the idea. There was no reference to a social tariff in a recent Whitehall consultation on energy market changes.
Last winter’s handout proved costly for the Treasury and, if funded through taxation, a further intervention could push up government costs with an election on the horizon.
Andrew Bowie, the minister for nuclear and networks, refused to comment on whether further help was being considered for Hunt’s autumn statement. He said the fall in the price cap represented a “positive day for British people”.
“Where it has been required, and where it’s needed, this government has always stepped up.”
Labour has not thrown its weight behind a social tariff, but the party says it would toughen the windfall tax on North Sea oil and gas companies to pay for further financial support in the cost of living crisis.
The shadow energy secretary, Ed Miliband, said: “The problem is the Tories have learned no lessons from this crisis. They continue to side with the oil and gas companies making record profits over hardworking British families, with their refusal to fix the gaping loopholes in the windfall tax or make the sprint we need for clean power.”
The new Ofgem rate will apply from October to December before it is adjusted again in January, when it is expected to rise again. The cap does not limit the amount customers pay: those who use more energy pay more.
