In a bitter blow to British households, the energy price cap is set to rise once again from January 2024, pushing average annual bills up to £1,738. The 1.2% increase, announced by regulator Ofgem, comes on top of a 10% hike already implemented for the current quarter.
The relentless surge in energy costs is heaping immense pressure on consumer finances, as millions also grapple with rising mortgage payments and rampant inflation. Analysts warn there’s no end in sight to the pain, with the lingering impact of the energy crisis set to be felt for years to come.
A Devastating Blow to Household Budgets
For the average British family, January’s price cap increase means finding an extra £21 a year, or roughly £1.75 a month, to cover gas and electricity. But that’s on top of the £156 annual increase that took effect in October, taking the typical yearly energy bill to £1,717.
While the latest rise may seem relatively modest, it’s yet another burden for households already at breaking point. As temperatures plummet during the winter months, many will be forced to choose between heating and eating.
We understand that the cost of energy remains a challenge for too many households.
Tim Jarvis, Ofgem Director General of Markets
The energy watchdog acknowledged the ongoing hardship facing consumers, but said the price cap has helped stabilize bills following last year’s record highs. At its peak in late 2022, the cap hit £3,280 a year as Russia’s invasion of Ukraine sent wholesale gas prices into orbit.
No Relief on the Horizon
Hopes of a significant drop in energy costs were dashed by the latest price cap announcement. While bills should be almost £1,500 cheaper than the eye-watering sums seen in early 2023, they remain far above pre-crisis levels.
Before Russia’s assault on Ukraine upended energy markets, the typical British household paid just £1,216 a year for gas and electricity. Experts say a return to those prices is unlikely anytime soon, if ever.
There’s no going back to so-called ‘normal’ prices, unfortunately. This is the new reality.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight
A Cost of Living Crisis With No End
Rising energy bills are just one aspect of the cost of living catastrophe engulfing Britain. Sky-high inflation, currently running above 10%, is eroding incomes and savings, while the Bank of England’s aggressive interest rate hikes are pushing mortgage costs to painful new heights.
The toxic combination of soaring expenses and stagnant wages means a staggering 7 million households are expected to be in “fuel stress” this winter – spending more than 10% of their income on energy.
Most Vulnerable Hit Hardest
As ever, it’s society’s most vulnerable bearing the brunt of the crisis. Charities warn that the elderly, disabled and low-income families face a “winter of despair” as they struggle to make ends meet.
To make matters worse, millions of pensioners will lose access to winter fuel allowance this year after the government restricted the benefit to only the poorest claimants. Age UK estimates this could push an additional 100,000 seniors into poverty by 2030.
Older people, struggling without their winter fuel payment, who were praying for a reduction in energy prices to help them in the new year, will be bitterly disappointed today.
Caroline Abrahams, Charity Director at Age UK
Calls for Urgent Government Action
With no respite from crippling costs on the cards, anti-poverty campaigners and opposition politicians are demanding the government step up support for those on the brink.
“As long as Britain remains exposed to the rollercoaster of global fossil fuel markets, we will be vulnerable to energy price rises over which we have no control,” warned Energy Secretary Ed Miliband. “The government’s clean energy mission is the only way to take back control of our energy, with cheaper and more secure power.”
But while the shift to renewables may eventually deliver more affordable bills, that’s likely to be many years away. For now, hard-pressed households have little choice but to cut back and hope for an end to the economic storm battering Britain.
