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‘Unbearable’ UK Energy Bills Divide Politicians Seeking Solution
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As soaring energy bills loom ever larger over the UK’s political landscape, one thing is clear: there’s no consensus among the Conservative Party’s warring leadership candidates on how best to solve it.
Amid dire forecasts that domestic energy bills this winter may be triple last year’s level, pressure is mounting on Liz Truss and Rishi Sunak to spell out how they’ll help struggling Britons when one of them succeeds Boris Johnson as prime minister next month.
Consumer groups and the utilities themselves warn that the crisis could push millions into so-called fuel poverty this winter, with measures announced in May by Sunak -- when he was still Chancellor of the Exchequer -- set to be eclipsed by the increase in energy prices that’s now predicted to take effect in October.
“People’s concern about how they’re going to make ends meet when the price cap goes up at the start of October is palpable, and turning to genuine fear,” said Keith Anderson, chief executive officer of Scottish Power, one of Britain’s biggest energy suppliers. “Most will never have been in this position before, and the scale of the burden will seem unbearable.”
The numbers are stark: In the UK, energy prices for most households are regulated by a price cap set by the regulator, Ofgem, which limits the cost suppliers may charge for energy. It rose by almost £700 ($845) to an average annual bill of £1,971 in April, and analysts at Cornwall Insight now estimate it could surge again to around £3,600 in October and exceed £4,250 in January.
Ofgem is due to announce the new cap later this month. With the regulator moving to a quarterly pattern of adjusting the cap, energy consultancy Auxilione predicted last week that it could surge past £5,000 in the second quarter of next year.
“It’s looking bleak, there’s no question of it,” said Tony Jordan, director at consultancy Auxilione. “Without significant government intervention, prices are going to be higher than they’ve ever been for consumers this winter.”
That all means the next prime minister will be faced with decisions that could require billions of pounds of new funding from the government. Here’s a rundown of different proposals:
Liz Truss
The foreign secretary and clear favorite to succeed Johnson as premier on Sept. 6 has so far announced plans that appear to fall far short of the scale of what analysts say is needed.
Her strategy relies on cutting taxes to allow Britons to keep more of their earnings. But her centerpiece promise to reverse a 1.25 percentage point rise in payroll tax -- brought in earlier this year by Sunak -- wouldn’t help the lowest earners who don’t even meet the threshold for paying that tax. And her plan to temporarily remove a green levy on energy bills would slash just £153 from bills and cut off the funding stream for energy-efficiency programs, effectively reducing support for one of the long-term solutions to the crisis.
Beyond that, Truss has refused to set out details on how she’ll help households, saying she’s against handouts and rejecting the idea of a fresh windfall tax to help pay for assistance.
“It barely scratches the surface,” said Matt Turner, a consultant at BFY Group.
Rishi Sunak
Truss’s rival has promised to expand the support that he announced earlier this year when he was chancellor, which includes at least a £400 discount on bills for every household, with additional payments to pensioners and those receiving benefits.
Sunak would also temporarily cut the 5% VAT charged on bills if the price cap rises above £3,000 as expected. He’s estimated his plan would come in at about another £10 billion.
Even that may not be enough. The support package Sunak unveiled in May came to £15 billion, bringing total spending to alleviate the crisis to £37 billion. At the time, annual energy costs for the winter were expected to rise to about £2,800.
If the goal is to keep assistance proportional to what was proposed in May, it will likely require £15 billion of additional funds, rather than the £10 billion Sunak is proposing, according to Auxilione’s Jordan. On top of that, as prices continue to rise early next year, the government might need to spend another £10 billion, he said.
Keir Starmer
The leader of the UK’s main opposition party on Sunday announced a £29 billion plan to freeze energy bills at current levels over the winter. That would benefit all households rather than being targeted at those who need it the most and would be funded from three sources:
An extension of the windfall tax on oil and gas firms which formed part of Sunak’s package in May that Labour estimates would raise £8 billion
Scrapping Sunak’s grants and redirecting £14 billion of the already-pledged government funding
Labour estimates £7 billion would come from the reduction in UK debt interest payments that stem from lower inflation as a result of the frozen energy bills
Industry
Scottish Power’s Anderson called for targeted support to cut £1,000 off the energy bills of the most vulnerable households. He also advocated that the government or a private institution underwrite a fund to subsidize energy prices now, to be repaid over a 10- to 15-year period. He raised these ideas at a meeting with government about the oncoming crisis last week.
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