The scale and damage of the body blow to Britain is suddenly and shockingly real. British consumers face an 80% rise in their energy bills from 1 October, the regulator Ofgem confirmed on Friday morning. In just five weeks’ time, the current annual energy price cap will balloon from £1,971, which itself seemed a spectacular level when it was set in April, to a barely believable £3,549. This means hardship for all and misery for millions. It is an insufferable event. No decent society can allow it to happen.
The magnitude of the latest leap in prices is not unexpected. It has been signalled for months by a volatile energy market and by Russian geopolitics. It is still a breathtaking threat to ordinary life, a tripling of the price of the average dual-fuel domestic tariff in less than a year. But the impact will soon be greater – and the effects more terrible. In January the cap will rise further, perhaps by the same amount again. In April it will soar yet again.
An alarming prospect is about to become a chilling reality during the coldest months of the year. No one should deceive themselves about either the scale or the urgency, least of all a government whose ministers are apparently so laid-back about the damage to come that none of them did the morning media round to respond to the Ofgem announcement. But if they do not realise that the life and temper of the nation have changed, they will soon find out.
In the not very distant days when energy prices rose more gently than they do now, it was possible to argue that the costs, although steep, could be managed without risking social breakdown. Stock solutions included encouraging changes in consumption (as the chancellor, Nadhim Zahawi, briefly attempted on Friday) and targeting support at the most badly affected. But those days are gone. These latest price increases mean that, unless far more radical actions are taken, hundreds of thousands face being cut off and millions will be plunged into intolerable debt. These are morally unacceptable options in a civilised society.
In less than two weeks, Britain will finally have a new prime minister and government. Whether that government is led by Liz Truss or Rishi Sunak, it will have to do far more on day one and in the coming months than either candidate has yet acknowledged. Their respective leadership campaign pledges – suspending green levies and scrapping VAT on bills – are wholly inadequate responses. The tax cuts that Ms Truss promises to win Tory members’ votes are not merely irrelevant to solving the cost of living crisis, but will make it worse.
Long-term answers – more renewables and a sustained energy efficiency drive – are essential parts of the response. But this is now an immediate crisis. It cannot be parked until the energy supply market has been transformed. It requires immediate action as well as generational change. The price of energy must be capped. The cost of doing this must be paid for by increased borrowing and by higher taxes. This is what other European countries are doing. Britain must do so too.
In an ideal world, this would be achieved by large and targeted progressive transfers focused on poorer households, including those in work. In the world we actually inhabit, however, a more effective alternative is to cap all bills and use windfall taxes, higher-rate income and wealth taxes and borrowing to pay for it.
To govern is to choose, it is often said. This is such a moment. The Conservatives must match the crisis with a big and bold intervention to cap the rises. Nothing else will do. If they remain in denial, they will have to give way to a government that is willing to do what is required.
