Households face April ‘cliff edge’ as energy price freeze cut from two years to six months
The new Chancellor has announced that the two-year energy price freeze for all households will now run for just six months, with campaigners warning that the move will lead to a steeper “cliff edge” for households.
Jeremy Hunt, who replaced Kwasi Kwarteng on Friday, has revealed the universal energy price guarantee will finish in April, with the Government launching a review on how to then support bills after this period.
The Chancellor said: “This is a landmark policy supporting millions of people through a difficult winter ad today I want to confirm that the support we are providing between now and April next year will not change.
“But beyond that, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.”
The Government said its changed approach after April will therefore “cost the taxpayer significantly less than planned” and will target those most in need to support.
It also confirmed that the energy bill relief scheme for businesses, which will cap corporate energy bills, is also set to end in April.
Liz Truss’s government launched the energy support scheme for households at the start of last month to limit the unit cost of energy so that a typical household will pay a maximum of £2,500 per year.
However, people could end up paying more if they live in a larger household, use more energy than average or live in a poorly insulated home, for example.
Campaign groups and industry organisations have warned that the end of the support could “heap huge financial pressure” on households come April.
Mike Foster, chief executive of the Energy and Utilities Alliance, said: “News that the energy price cap protection coming to an end in April will surprise and worry millions of hard-pressed families.
“Together with the announcement that promised tax cuts have also been withdrawn will heap huge financial pressure onto those already struggling to pay their bills.”
National Energy Action said ending the energy guarantee after six months is an “almighty trade-off” and has created “huge uncertainty” for households.
Questions need answering “quickly” on who will continue to get support, whether this will include people who do not receive benefits and whether support will be greater for those in the most need, chief executive Adam Scorer said.
He continued: “Households on the lowest incomes are already rationing their energy usage to dangerous levels. £2,500 is beyond their means.
“Many vulnerable people were holding on by their fingertips. Government has to be very, very careful it doesn’t prise them away.”
Director of policy and communications at Independent Age, John Palmer, said the statement “posed more questions than answers”.
He said: “Instead of ensuring stability, today only provided uncertainty. The review of the Energy Price Guarantee is extremely concerning. It’s no longer clear who will receive support beyond April 2023.
“Now millions of older people are wondering if they will be abandoned by the government and left with unaffordable energy bills and freezing homes next year.”
The End Fuel Poverty Coalition said people were already facing a financial cliff edge next April when support such as the Government’s energy discount payments ends, but this “has now become even steeper”.
Co-ordinator Simon Francis said: “Without the energy price guarantee, the Government will need to fundamentally reform the energy market alongside providing unprecedented levels of support for energy efficiency schemes and financial support for the most vulnerable.
“But any threat to people’s energy security is a threat to their health and wellbeing. If people cannot trust the Government to deliver the support it has promised, what trust can anyone have that they will keep people warm this winter and beyond?”
The end to the support for many households comes as the Government seeks opportunities to reduce spending after the Institute for Fiscal Studies warned that the state faces a roughly £60 billion financial black following the mini-budget announcement last month.
The Treasury has since pulled back on a number of previous unfunded tax cuts or spending plans.
Intentions to reduce spending on energy support for households will have benefited from a recent slump in global gas and oil prices.
Last week, European gas prices hit a three-month low amid a decline in demand from households and businesses.
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