UK households could be protected from soaring energy bills this winter as ministers look at ways to soften the blow of further price rises. Millions of Brits are already braced for higher costs from October, with the annual figure for a typical household set to rise by around £60 to £1,723.
Further rises expected in January
There are fears families could be asked to find even more money just a few months later, with forecaster Cornwall Insight reportedly suggesting bills could reach £1,872 in January. The prospect of further rises has sparked fresh questions over whether households should be protected from soaring energy costs.
Ministers are understood to be looking at extra protection for people on lower incomes ahead of next month's Budget. Chancellor John Healey has reportedly asked officials to examine what could be done if prices continue to rise, according to The Times.
VAT removal and savings
No new measures have been confirmed, but the reports raise a wider question over whether families should be given greater protection when energy prices rise. Energy bills will rise by 4% from October 1, despite the Government already taking steps aimed at bringing down costs.
VAT is being removed from domestic electricity bills from the same date, which is expected to save households around £45 a year. But those savings risk being eaten up by higher wholesale energy prices, which have risen amid continuing tensions in the Middle East.
Potential extension and existing help
Ministers could reportedly choose to extend the VAT measure beyond its current period if prices remain high. There is already additional help available for some lower-income families through the Warm Home Discount, which provides £150 off energy bills to nearly six million households on means-tested benefits.
But any further protection would have to be paid for at a difficult time for the Treasury, with the Chancellor preparing to deliver his Budget on October 28. The impact of soaring energy prices could also stretch beyond household finances.
Interest rate warning
Bank of England deputy governor Clare Lombardelli has warned that interest rates could rise if higher energy prices persist. She said: "The longer higher energy prices persist, the greater the risk that indirect effects build and that inflation expectations, wage bargaining and price-setting behaviour begin to adjust in response."
A Government spokesperson said: "The Chancellor is fully focused on giving families and businesses breathing space and helping ease cost pressures."That’s why we have removed VAT from electricity bills and are reducing electricity costs by up to 25% for more than 10,000 manufacturing businesses through our British Industrial Competitiveness Scheme."
