Ofgem CEO: We should have been tougher with energy suppliers before crisis

MPs have been warned that the 54% increase in energy bills in April will have an immediate, serious impact on households – especially those already struggling.

Jonathan Marshall, senior economist at Resolution Foundation, told the BEIS committee that in 2014, the last time fossil fuel prices surged, people cut back on social spending such as going to the pub or restaurant.

But this time, the price cap means the overnight increase in bills will be “much more of a shock”, so families could be forced to cut non-discretionary spending, such as bills.

Peter Smith, director of policy & advocacy at charity National Energy Action warned that the people who will be hardest hit by rising energy bills are on the lowest incomes, in the least fuel-efficient homes.

Households will be making trade-offs about which essential goods and services they can afford, he agrees.

Smith warned:

People used to talk about the choice between heating or eating. It’s getting to a situation where people won’t be able to do either satisfactorily.

These rises will have massive, massive impacts on the poorest households, not only decimating their finances but also their health and wellbeing for a long time to come, sadly.

There will be 6.5m UK households who can’t keep their houses warm, he continues.

That doesn’t take into account the government’s proposals last week — because some poorest households won’t benefit from the £150 council tax rebate on properties in bands A-D.

And the £200 temporary cut to energy bills announced by chancellor Rishi Sunak must be repaid, so is only a loan (repaid at £40/year for the next five years).

Smith says National Energy Action are “bitterly disappointed” that the government hasn’t honoured its commitment to ensure interventions in the energy market would be targeted at the poorest households.