Fears over the “financial timebomb” facing millions of families grew on Tuesday after energy market experts warned that bills could rise by about £200 more than previously thought in October.
Analysts from Cornwall Insight had already predicted the Ofgem energy price cap could rise to £3,359 a year in the autumn — a leap of about 70 per cent on the £1,971 cap set in April.
But on Tuesday they upgraded their forecasts, predicting that bills will reach approximately £3,582 per year for the average household from October.
Estimates for January — when the cap is set to be reviewed again — were even worse with the consultancy predicting a £650 rise, meaning a typical household could pay the equivalent of £4,266 a year.
With the Tory leadership candidates divided on how best to tackle the cost-of-living crisis — Liz Truss said she favours tax cuts over “handouts” while Rishi Sunak has said he will offer more direct help — analysts said the Government’s current support package was not enough.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty, this will only compound the concerns.
“It is essential that the Government use our predictions to spur on a review of the support package being offered to consumers. If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now.”
The latest gloomy forecasts came as research showed that households in the commuter belt are set to be hit hardest by the looming spike in energy bills, which are being driven higher by surging wholesale gas prices partly caused by the Russian invasion of Ukraine.
The data, compiled by the Liberal Democrats, reveals the top 10 local authorities facing the biggest average rise are in the South-East. Elmbridge households are likely to be hardest hit with an extra £2,279 a year from October, Tandridge is in second with £2,175 and Mole Valley third with £2,163.
Lib Dem leader Sir Ed Davey said: “The cap rise must be cancelled to save hard-working families in London and the South-East. Britain’s squeezed middle is set to be dragged into the worst cost-of-living crisis in a generation and we’ve heard no answers from Truss or Sunak.”
While still chancellor, Mr Sunak announced a £15 billion package of support in May which includes a £400 rebate on energy bills from October and £650 of support for the country’s poorest households.
But both Tory leadership candidates are under pressure to set out new measures which can be implemented once one of them takes office on September 6.
Former Labour prime minister Gordon Brown yesterday called for an emergency budget before the UK hits a “financial timebomb” this autumn.
The Lib Dems, which calculated the possible average regional rises across the country based on Cornwall Insight’s forecasts before they were upgraded this morning, said that cancelling the October energy price rise would cost the Government £36 billion.
Meanwhile, the Bank of England’s Deputy Governor Dave Ramsden said today it will probably have to raise interest rates further from their current 14 year-high to tackle inflation pressures that are gaining a foothold in Britain’s economy. In a bid to tackle soaring inflation, the Bank raised rates last week by 0.5 percentage points to 1.75 per cent — its biggest single hike in 27 years.
With inflation forecast to rise to more than 13 per cent later this year, Mr Ramsden told Reuters: “I do think it’s more likely than not that we will have to raise the Bank Rate further. But I haven’t reached a firm decision on that.”
And there was more bad news for struggling families as new data out today showed airfares in the first week of August, the peak month for UK travel, were up 30 per cent on average for the top 36 routes compared with pre-pandemic levels, according to the online travel agency Kayak.
