Ministers are considering ways to mitigate the impact of soaring gas prices on the most vulnerable households, as inflation and shortages are set to multiply woes this winter.
The government has sought to downplay concerns about soaring gas prices and potential blackouts this winter. Publicly, the government asserts that the price cap is the best protection for consumers and has resisted calls from suppliers to lift it in response to surging wholesale gas and electricity prices. One Whitehall source told The Guardian that it would be “terrifying” if suppliers were given a “carte blanche” to raise bills as they wanted.
But the price cap is already set to increase from 1 October: by £139 (12%) for 11 million households on standard variable tariffs and by £153 (13%) for the four million households with prepayment meters. The hike will hit just the £20 uplift to Universal Credit ends, itself leaving millions of households £1,000 worse off.
A wave of supplier failures could also leave millions facing higher-than-expected energy bills. Customers who signed up to a cheap fixed tariff with a discount supplier could find themselves moved to a supplier charging higher rates if their original company fails.
Additionally, unless there is a sustained reduction in wholesale gas prices this winter, Ofgem will certainly hike the price cap again in the spring. Projections put that rise, to be announced in February and take effect in April, at between £178 and £294.
High inflation—expected to hit 4% this winter—and bare supermarket shelves due to the ongoing supply chain disruption will compound woes. The confluence of these factors has led Labour and some Tory MPs to urge the government to do more to protect vulnerable households.
The government is already reportedly weighing ways to give families relief from energy bills. Options under consideration include increasing Winter Fuel Payments, the Warm Home Discount and Cold Weather Payments. The government could also bring forward changes to the Warm Home Discount scheduled for 2022, making another 780,000 people eligible for the £140 annual rebate on their electricity bills.
Business and energy secretary Kwasi Kwarteng suggested on Tuesday that these benefits could be increased, acknowledging that households are facing a “very difficult winter.”
Specifically, he said he was “very keen to keep the warm home discount” beyond its intended end date of 2022. The government has been consulting on an expansion and refinement of the support scheme, with reports circulating that it could raise the rebate to £150.
The annual rebate has remained at the same level for nine years, despite a 60% increase in the cost of the cheapest energy tariff on the market.
Asked if he’d asked Chancellor to increase the Warm Home Discount, Kwartent said: “We have discussions about the budget, and you will see what happens in the budget.” Rishi Sunak’s budget is expected on 27 October.
Kwarteng also said, “there are other winter fuel payments that we’re looking at.”
Ministers are also locked in negotiations about increasing Universal Credit. However, the mooted change to the taper rate—the amount of UC withdrawn for every pound a recipient earns—won’t offset the end of the £20 uplift or the rising cost of living, poverty charity Turn2Us warns.
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