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The Guardian - UK
The Guardian - UK
Comment
Editorial

The Guardian view on the energy price cap: nothing to boast about

Photo of an online energy bill.
‘The upshot is that many households will in fact be paying more for their energy this winter than last.’ Photograph: Jacob King/PA

“Energy prices to fall again this winter” was the upbeat headline on the press release published on Friday by the energy regulator, Ofgem. On the face of it, the fall in the energy price cap from October is indeed welcome news for every household in Britain. In the current quarter, the cap for a typical household energy bill is set at £2,074 a year; from October the figure will be £1,923. It is the third quarterly fall since the cap reached a peak of £4,279 in January this year and the lowest cap since the start of 2022.

Yet the Ofgem headline will also be misleading for millions. One reason is that, even from October, the cap will still be much higher than when it was first imposed, in response to political pressure, in 2019. Another is that, unlike when the peaks were reached last winter, the £400 per household universal rebate no longer applies; nor does the government’s October 2022 energy price guarantee, which disappeared at the start of July.

Then there’s a third factor. Standing charges, which all consumers pay even if they never switch the lights or the heating on, are expected to rise to just over £300. Finally, and importantly, the new £1,923 cap does not apply across the board; it is calculated on the price per unit of electricity or gas, not on the consumer’s total bill. Heavier users may have larger bills.

The upshot is that many households will in fact be paying more for their energy this winter than last. According to Resolution Foundation calculations, this will be true of about 35% of English households, and 47% of the households with lowest incomes, many of which have to use prepayment meters. According to Citizens Advice this week, 7.8 million people had to borrow to pay their energy bills in the first half of this year, a number that could rise this winter.

Some of this might be a bit more tolerable if the government did more to subsidise those on whom the impact falls most, or if Britain did more to mitigate its dependence on gas and oil by promoting alternatives and insulating more homes.

But the record is bad on all these issues. Plans for targeted energy support for poorer households, announced in the budget this year, seem to be going backwards. Home insulation programmes are falling, not rising. Heat pump installations in the UK are running at two per 1,000 households, compared with 20 per 1,000 in France.

Higher energy costs affect businesses too, even though in the end households can also pick up the tab for them in the form of higher prices and inflation, which presses down on incomes and budgets. Since 2019-20, the average household food bill has increased by £960. Mortgage rates have surged upwards and, as mortgage holders reach the end of fixed-term deals, their housing costs rise sharply too. Private rents are up 10% in the past year.

The bottom line from all this is stark. True, there may be some faint signs of marginal recovery in the macro-economy. At the household level, however, there is little place for optimism. Budgets are likely to remain squeezed for months, even with lower energy bills. The cost of living crisis remains almost as severe as 2024 approaches as it was in 2022-23. The government appears absent without leave. In a general election year, voters are unlikely to ignore that.

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