Rishi Sunak bails out struggling households as bills set to hit £2,800 a YEAR
Cost of living: Sunak 'has to take action' says Reynolds
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
The Chancellor was given formal notice yesterday (TUES) that the price cap is predicted to jump by 42 percent in October. Ofgem chief executive Jonathan Brearley said the typical bill could soar even higher as the UK suffers the worst energy crisis since the 1970s. The regulator also estimated around 12 million customers face being left in fuel poverty, where bills cost more than 10 percent of disposable income.
Mr Sunak is understood to be working on a new package of measures to support the households hardest hit by energy price rises.
Officials acknowledged that the guidance on the expected rise in the price cap from the head of Ofgem yesterday was crucial information that could accelerate the announcement of the measures.
Some Whitehall insiders believe the announcement could come as early as tomorrow with the Commons due to rise for the Whitsun Recess tomorrow afternoon but early next month is also being considered.
Boris Johnson’s spokesman said: “This has been a long-standing challenge both in the UK and globally. It is something the Prime Minister and Chancellor have been working on very closely.”
He added: “I’m unable to give you a steer on the timing for any possible future announcements, not least because nothing has been decided yet.”
No 10 said the Ofgem warning will help plan for “any future response” from the UK Government.
“It is certainly an important factor, that information that has been set out today, albeit, as I understand it, indicative,” the spokesman added.
“It is an important factor in deciding what the challenges are that the public are going to face in October when this rise is due to come in, and therefore helps with planning for any future response.”
The energy price cap rocketed to £1,971 in April and a typical household bill is now predicted to rise by further £800 per year.
Mr Brearley told the Business, Energy and Industrial Strategy Committee that global gas prices have increased since Russia’s invasion of Ukraine.
“Gas prices are higher and highly volatile. At times, they have now reached over 10 times their normal level,” he said.
“I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the Government about the likely price implications for October.
“Therefore, later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.
“This is uncertain; we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2,800.”
Mr Brearley said the price changes are a “once-in-a-generation event not seen since the oil crisis of the 1970s” and meant some suppliers would collapse.
But he admitted Ofgem had failed to take measures that could have stopped some firms going to the wall.
“It is clear to me and it is clear to the current Ofgem board that, looking over all of our institution’s history, had financial controls been in place sooner we’d have likely seen fewer suppliers exit the market, and for that on behalf of Ofgem and its board I would like to apologise.”
Charities warned Mr Sunak he must act now to stop households falling into “deep, deep crisis.”
Adam Scorer, chief executive of National Energy Action, said: “Ofgem’s warning that the price cap will rise again by over £800 in October will strike terror into the hearts of millions of people already unable to heat and power their homes.
“It will plunge households into deep, deep crisis. The financial, social and health impacts are unthinkable.
“The UK Government simply must act and use the welfare system and schemes such as Warm Homes Discount to get significant financial support to people before winter. The ambition should be to find ways of covering the entire price increase for people on the lowest incomes.”
Dennis Reed, director of Silver Voices said: “Misery is being heaped on misery for millions of older people.
“We are facing a desperate situation, not previously experienced in peacetime. There is no way the basic state pension can meet such astronomical rises and we are now calling for a rise of £1,000 in state pension rates before the new energy prices are implemented. Government inaction and dithering on the crisis is inexcusable.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “This news will be utterly devastating for the 6.1 million homes currently in fuel poverty and for the additional 1.7 million households who will now spend this winter struggling to keep themselves warm.
“Fuel poverty becomes a public health emergency in winter and the hidden cost of the UK Government’s continued inaction will be felt in a collapse in the mental health of those in fuel poverty, increased pressure on the NHS from those with health conditions affected by damp properties and excess winter deaths caused by cold homes.
“Unless the Government acts now, it will have blood on its hands this winter.”
Business Secretary Kwasi Kwarteng said bill payers had to “wait and see” what extra help would be on offer to cope with rising energy costs.
“Both the Prime Minister and the Chancellor have said that there will be further announcements in respect of giving assistance to people,” he told MPs.
He said that £9.1 billion had already been allocated to help with rising bills.
“Both the Prime Minister and the Chancellor have said there is more to do and we have to just wait and see what is forthcoming,” he added.
“It’s a difficult time, we all know that people are under huge stress. We also know that the cost of living is a very real issue and nobody is suggesting that the Government can pay the entirety of the energy bill.
“What we are committed to is giving support and that’s what we are doing.”
Mr Kwarteng defended the decision to keep the chief executive of failed energy firm Bulb in place after the Government bailout last year.
Labour MP Charlotte Nichols queried who authorised for Hayden Wood, the boss of the company, to keep being paid the same £250,000 salary that he was collecting before the business went into administration.
Mr Kwarteng said: “As far as the special administrative regime is concerned, the whole point of it is to ensure a smooth handover, so essentially he is being paid, as I understand it, on the terms he was originally employed.”
Shadow chancellor Rachel Reeves said: “This is extremely concerning and will cause huge worry for families already facing soaring bills and rising inflation.
“How many more alarm bells does the Chancellor need to hear before he acts? The government have got to get a grip on this crisis and to protect families and our economy.”
One in four Britons are struggling to cope with cost-of-living crisis
Almost a quarter of Britons are struggling to cope with the soaring cost of their weekly shop after grocery inflation rose to its highest level since 2009, at the height of the financial crisis, writes Ciaran McGrath.
The rate at which prices were rising in supermarkets now stands at seven percent, up from 5.9 percent last month, a study found.
Prices are rising fastest in markets including dog food, savoury snacks and fresh beef. The increases reflect the way in which Russia’s war on Ukraine has pushed up the price of energy, fertiliser, fuel and animal feeds, with costs passed down the supply chain.
Even before Putin ordered his invasion on February 24, inflation was spiking as a result of rising shipping costs, slowing the recovery from the global COVID-19 pandemic.
Consumer analyst Kantar Worldpanel’s most recent report, covering the grocery market over the 12 weeks to May 15, showed supermarket sales were down by 4.4 percent on the same period last year.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “People are really feeling the squeeze at the supermarket tills and they’re having to stretch their budgets further to accommodate rising prices.
“To put the most recent numbers into context, if you were picking up supplies for a family fry-up over the long weekend with toast, eggs, sausages, bacon, and beans it would cost you £6.83 – that’s a significant 40p increase on last year.”
He added: “In our recent Kantar Pressure Groups survey, 43 percent of households described themselves as ‘managing’ while 22 percent said they were ‘struggling’.
“Within the growing group of shoppers struggling to make ends meet, the rising price of groceries is of concern to over nine in 10 people, making it the second most important issue behind the spiralling cost of energy bills.”
Separate research published by personal finance startup HyperJar and analytics company Retail Economics, also yesterday, suggested the least affluent families saw their disposable incomes plummet by 12.3 percent last month compared with the same period in 2021 – in other words, £59 per month less cash available to spend on non-essential items.
By comparison, the most affluent households have seen their spare cash fall by just 1.4 percent compared with the same month last year, leaving them with £61 less to spend on discretionary items in April. Roughly £2.3bn worth of income for non-essentials is likely to have been wiped off the economy throughout the month.
Mat Megens, CEO of HyperJar, says: “Many of us have never lived through a period of high inflation and it shows. Experts from ministers and markets to the Bank of England are getting their cost-of-living predictions wrong, prices are rising, and salaries aren’t keeping up. Individuals can’t control this surround-sound of uncertainty, but we can control what we spend and where – and try to make the most of every penny.”
Richard Lim, CEO of Retail Economics, says: “The country is witnessing an enormous income shock with the least affluent families anchored at the epicentre. With inflation nearing double digits, life has turned extremely uncomfortable for many households.
“The most disadvantaged families are facing genuine trade-offs between what essentials to buy. There’s only so much cutting back and shopping around that can be done with inflation reaching these levels.”
Boris Johnson this week insisted there would be further help to deal with the rising cost of living but he was “not attracted” by the idea of new taxes in response to calls for a one-off levy on oil and gas firms to support struggling households.
The Prime Minister has faced pressure from MPs, including some Tories, to introduce a windfall tax to pay for new measures to help poorer households cope with rising food and energy bills.
Mr Johnson said: “No option is off the table, let’s be absolutely clear about that. “I’m not attracted, intrinsically, to new taxes.
“But as I have said throughout, we have got to do what we can, and we will, to look after people through the aftershocks of Covid, through the current pressures on energy prices that we are seeing post-Covid and with what’s going on in Russia and we are going to put our arms round people, just as we did during the pandemic.”
However, one idea which appears to have been rejected by the Treasury is a return of the £20-a-week increase in Universal Credit.
Petrol costs still rising
Fuel prices continue to climb to record highs, figures show, writes Neil Lancefield.
The Department for Business, Energy and Industrial Strategy said the average price of a litre of petrol at UK forecourts was 167.7p on Monday. That was up from 165.1p a week earlier.
The average price of diesel on Monday was 181.14p per litre, up from 179.7p last week. Chancellor Rishi Sunak implemented a 5p per litre cut in fuel duty on March 23, two days after average prices were 166.8p per litre for petrol and 180.3p per litre for diesel.
Retailers have been accused of raising profit margins since the policy was introduced.
Steve Gooding, director of the RAC Foundation, said: “This news means more financial frustration for drivers and businesses, not least the owners of the country’s 18 million petrol-powered cars, most of whom will be private individuals and families.
“Unfortunately, the signs are that the pain isn’t over yet.
“Wholesale petrol prices are still close to recent highs and currently exceed those of diesel.
“As many people are looking anxiously at the prospect of ever higher bills to heat and light their homes, so too an increasing number of families are facing transport poverty.
“For most drivers, in the short term, there is little option but to grit their teeth and pay up.
“Even if they could afford them, the waiting time for new cars, including electric ones, can stretch to many months, and the used market is buoyant, meaning the scope to upgrade the family run-around for something more economical may be extremely limited.”
Firms dealth power blow
More than £2.4 billion was wiped off the value of Britain’s three biggest power companies, due to fears that they will get hit by a windfall tax, writes Geoff Ho.
Shares in British Gas owner Centrica, power plant group Drax and SSE tumbled following reports that Chancellor Rishi Sunak is looking at extending a windfall tax beyond just targeting North Sea oil and gas producers to other groups in the energy sector.
Oil and gas producers are benefiting from higher commodity prices, while power generators are believed to be in line for excess profits of £10 billion thanks to soaring wholesale prices.
Supporters of a windfall tax say that it is needed to provide the Government with the funds it needs to help protect Britons from the worst ravages of the spiralling inflation.
SSE shares fell 7.9 percent to 1,766p per share, wiping £1.6 billion off the value of the company. Centrica similarly saw its market capitalisation fall to £4.9 billion, after its shares dropped 7.2 percent to 83.2p. However, the biggest drop was seen by Drax. Its shares fell 13.8 percent to 700p, sending its valuation down to £2.8 billion.
Danni Hewson, AJ Bell financial analyst, said: “Grabbing a chunk of the profits generated by the current energy cash machine and sharing them out among people struggling to pay their bills would be a popular move and one that would silence the constant drumbeat coming from campaigners, opposition politicians and even Tory backbenches.”
The threat of a windfall tax on power generators sent renewables groups, down too. Greencoat Wind shares fell 6 percent to 149.6p, sending its value down to £3.4 billion.
Rishi makes headway in erasing UK’s excess debt
Rishi Sunak’s tax rises have helped ease the Treasury’s debt burden, new figures have shown, writes Macer Hall, Political Editor.
Official data showed Government borrowing stood at £18.6 billion last month, lower than forecast and down by £5.6 billion from a year ago.
The Treasury raked in £10billion more last month than in April 2021 thanks to the Chancellor’s National Insurance hike and freezing of income tax thresholds.
The better-than-expected public finance figures from the Office for National Statistics raised hopes that Mr Sunak will have some leeway to cut taxes and offer households more assistance in the face of the cost-of-living squeeze.
But economists warned that much of the cash could be needed to pay debt interest rates which are tipped to soar this year.
Following the release of the monthly public finance figures, the Chancellor said: “While we are doing what we can to help families deal with rising prices, inflation is also pushing up our spending on debt interest – which is expected to reach £83 billion this year.
“We must take a balanced and responsible approach to support people now, while also not burdening future generations, and we’re on track to drive public debt down by 2024-25.
“We’re also making sure every penny of hard-earned taxpayer money is being spent on our world leading public services, including by setting up the Public Sector Fraud Authority to clamp down on criminals and the Efficiencies and Value for Money Committee to drive efficiencies across government.”
The overall Government borrowing figure was still the fourth highest for April since records began and were £7.9 billion higher than in April 2019 before the pandemic struck. But the data also showed borrowing was revised down by £7.2 billion for the financial year to the end of March 2022, to £144.6 billion. Ministers discussed the economy at yesterday’s Cabinet meeting, with several around the table insisting public-sector pay increases needed to be curbed to avoid fuelling inflation.
Mr Johnson opened the Cabinet by saying his Goverment was “getting on with the job that the people of the UK sent them here to do, growing the economy to address the cost of living.”
His spokesman said:”The PM reminded Cabinet that figures published last week show unemployment is now down to its lowest level since 1974 at 3.7%.
“He also highlighted that youth unemployment is at or near record lows and the number of employees on the payroll is back at pre-pandemic levels.
“The PM said that while this was fantastic news and shows we’re heading in the right direction, there’s still a huge amount of work to be done.
“He added that this means being responsible with every pound of public money we spend, and making sure all our departments and the services they deliver are as efficient and effective as they can be.”
Taxpayers are crying out for immediate action, and the increasing tax take gives the Chancellor the opportunity to press ahead with much needed tax cuts
The spokesman added: “The Prime Minister said the public were understandably anxious about global cost of living pressures and that the Government would continue to support those most in need.
“The Government has already promised to increase public sector spending and is awaiting decisions by the public sector review bodies.
“However Ministers made clear that the risk of triggering higher inflation must be part of considerations when deciding pay awards this year.” Campaigners last night said the improved Government borrowing figures should allow the Chancellor to act to ease the pressure on households.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “These figures lay bare the economic headroom to support Brits struggling with a cost of living crisis.
“Taxpayers are crying out for immediate action, and the increasing tax take gives the Chancellor the opportunity to press ahead with much needed tax cuts.
“If the Government wants to boost growth and help households, they can deliver both right now by bringing forward the planned income tax cut.”
The spokesman added: “The Prime Minister said the public were understandably anxious about global cost of living pressures and that the Government would continue to support those most in need.
“The Government has already promised to increase public sector spending and is awaiting decisions by the public sector review bodies.
“However Ministers made clear that the risk of triggering higher inflation must be part of considerations when deciding pay awards this year.” Campaigners last night said the improved Government borrowing figures should allow the Chancellor to act to ease the pressure on households.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “These figures lay bare the economic headroom to support Brits struggling with a cost of living crisis.
“Taxpayers are crying out for immediate action, and the increasing tax take gives the Chancellor the opportunity to press ahead with much needed tax cuts.
“If the Government wants to boost growth and help households, they can deliver both right now by bringing forward the planned income tax cut.”
Source: Read Full Article
