UK households are bracing for another cost-of-living blow as energy bills could rise by up to £500 annually, according to a stark warning from the Resolution Foundation. The think tank warns that prolonged high gas prices could push Ofgem's price cap significantly upwards from July, erasing recent gains and piling fresh financial strain on millions.
The emerging threat follows disruption in the Middle East, which propelled oil prices from around $70 to $100 per barrel, while wholesale gas costs have surged by more than 60%. Petrol prices have already climbed from roughly £1.32 to £1.40 per litre in March alone, with further rises expected.
However, experts warn the most severe impact will hit households via energy bills rather than fuel costs. Even after April's anticipated reduction, bills remain 17% higher—or £236 more—in real terms compared to 2020. The Resolution Foundation cautions that if wholesale prices remain high, typical annual bills could surge back to levels requiring emergency government intervention.
Around 40% of households are now on fixed-rate tariffs, providing some insulation from immediate price hikes—four times the proportion seen during the 2022 crisis. But millions on standard variable tariffs face direct exposure to any rise in the price cap from July onwards.
The think tank is calling on ministers to avoid expensive blanket subsidies and instead target support at vulnerable families. A key recommendation is the introduction of a 'social tariff' offering reduced energy prices for low-income households with high energy needs. The report argues this would outperform previous schemes by focusing support on those who need it most and avoiding unnecessary spending on households already protected by fixed tariffs.
With energy bills not expected to rise until July at the earliest, and consumption lower in summer, the government has a limited window to act. The Resolution Foundation warns that without a targeted strategy, billions could be spent inefficiently, leaving families facing another financial burden as winter approaches.
