UK cost-of-living crisis worsens as energy price cap nearly doubles

Average electricity, gas bills predicted to touch 5,000 pounds or more

Follow us on Google News-khaleejtimes

FILE PHOTO: People walk through the City of London financial district, amid the coronavirus disease (COVID-19) outbreak in London, Britain, December 1, 2021. REUTERS/Henry Nicholls
FILE PHOTO: People walk through the City of London financial district, amid the coronavirus disease (COVID-19) outbreak in London, Britain, December 1, 2021. REUTERS/Henry Nicholls


Published: Fri 26 Aug 2022, 2:08 PM

Last updated: Fri 26 Aug 2022, 2:18 PM

Britain announced Friday a vast 80 per cent hike in electricity and gas bills, in a dramatic worsening of the cost-of-living crisis before winter as the country awaits a new leader.

Regulator Ofgem said its energy price cap, which sets prices for consumers who are not on a fixed deal with their supplier, will in October increase to an average 3,549 pounds ($4,197) per year from the current 1,971 pounds.

Worse is expected to come in January, when Ofgem next updates its cap, with average bills predicted to top 5,000 pounds - or more.

"The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe," Ofgem said.

The announcement sparked an outcry from charities which said financially-squeezed households faced one of the "bleakest Christmases" for years.

UK inflation is already in double-digits and forecast to strike 13 per cent in the coming months due to runaway energy bills.

Inflation is at its highest level since 1982, with industrial action over pay growing, and the country is predicted to enter recession later this year.

The near-doubling in the energy cap will likely tip millions into fuel poverty, forcing them to choose between heating or eating, anti-poverty experts say.

"We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make," said Ofgem boss Jonathan Brearley.

"I talk to customers regularly and I know that today's news will be very worrying for many."

The rampant cost-of-living has dominated the race between Liz Truss and Rishi Sunak to succeed Conservative Prime Minister Boris Johnson.

Political opponents have accused him of leading a zombie government and doing nothing to address the problem since his resignation in July.

Household and business consumers, energy suppliers and opposition politicians said urgent action is needed to avoid putting the most vulnerable in desperate situations.

A University of York study recently estimated two-thirds of UK households are at risk of fuel poverty by next year.

But Johnson, who has been on holiday twice in recent weeks, has promised to leave major fiscal decisions to his successor.

The winner will not be announced for another 10 days.

Foreign Secretary Truss says she favours tax cuts over direct "handouts".

She wrote in the Daily Mail on Friday that her "immediate priority will be to put more money back in people's pockets by cutting taxes" if she wins.

Former finance minister Sunak has argued tax cuts will worsen inflation, instead proposing further direct support.

The UK government has so far offered help, including 400 pounds being taken off every household's energy bill later this year, as well as other targeted support to pensioners and those on disability benefits.

Leaders of devolved parliaments in Wales and Scotland have called for a freeze on the price increase.

Scottish First Minister Nicola Sturgeon tweeted that the "rise must be cancelled" and the government should agree with energy companies on a package to cover the costs.

Her Welsh counterpart Mark Drakeford backed calls from his Labour party for a freeze on bills and windfall taxes on oil and gas giants.

Gas comprises a major part of Britain's energy mix, with tens of millions of homes relying on gas-powered boilers for their heating.

Anti-poverty think-tank The Resolution Foundation has demanded "radical" measures to prevent "a catastrophe" this winter, warning of "serious physical and financial damage to families across Britain".

With many poorer households relying on more costly pre-payment meters, the foundation predicted thousands could see their energy cut off entirely.

It is calling for poorer households to be offered a "social tariff" with a 30 per cent discount.


French energy giant EDF has urged the government to double its energy support package to Britons, with its managing director for UK customers, Philippe Commaret, telling AFP that the hike would be "catastrophic".

Adam Scorer, chief executive of fuel poverty charity Energy Action, also told Sky News that the government must double its support package and work with the regulator to introduce a social tariff" for vulnerable households.

More news from