Household energy bills set to soar

Scottish households are facing a record energy bill increase of around 50 per cent from April – with the UK Government set to foot around half the cost of the price hike.

In response to a fourfold increase in wholesale prices over the last year, the energy regulator Ofgem has lifted the maximum rate that suppliers can charge for an average dual-fuel energy tariff from £1,277 to £1,971 a year – paving the way for a 54 per cent increase in gas and electricity bills.

The 22 million UK households which pay by direct debit will now pay the higher rate, whereas homes using a pre-pay meter, which are typically more costly, will on average face an annual bill of £2,017.

Jonathan Brearley, the chief executive of Ofgem, said: “We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.”

In response to the price hike, the UK Government has announced an energy bills rebate of up to £350.

Around 28 million households will receive an upfront discount on their inflated bills worth £200 – less than a third of the average price increase of £693 – while around 80 per cent of household in England will receive a £150 council tax rebate.

As council tax is devolved, there will be around £290m in Barnett consequentials for the Scottish Government, which can choose to spend the money in the current year or the next.

Speaking at First Minister’s Questions, Nicola Sturgeon said all of the money coming to Scotland in consequentials would be used to offset the crisis. However, while welcoming extra help from the Treasury, she said the measures did “not go far enough”.

Prime Minister Boris Johnson said: “During the pandemic this government has acted decisively to protect jobs and livelihoods, particularly for those on the lowest incomes.

“But today we recognise the real and growing concerns people have about the cost of living – and once again we are taking action.

“We are delivering a new package of targeted support to help with the financial pressures felt by families right across the country, with additional help for those most in need.

“This builds on the changes we’ve made to Universal Credit to put £1,000 more per year into the pockets of hardworking people and the increase to the National Living Wage to advance our vision for a high-wage and financially secure Britain.”

In response to the price cap increase announcement, the Scottish Government's Net Zero and Energy Secretary Michael Matheson MSP said: “Given the sharp rise in wholesale energy costs in recent months, today’s announcement from Ofgem is not unexpected and confirms that households across Scotland – indeed right across the UK – now face a hugely challenging increase in energy bills without urgent, appropriate and targeted intervention from the UK Government.

“Our foremost concern is for households who are in, or at risk, of fuel poverty. Analysis estimates that this price cap increase could move a further 211,000 households in Scotland into fuel poverty in the coming months and I would urge those worried about or struggling to heat their homes to seek advice and support. Our free and impartial Home Energy Scotland service stands ready to offer this service.

“The Scottish Government is using all powers and resources available to us to support people in Scotland from the cost of living crisis. However, powers relating to the energy markets remain reserved and I, alongside ministerial colleagues, have repeatedly called for the UK Government to urgently take further, tangible actions to support households - including a reduction in VAT, targeted support for those on low incomes and four-nations discussions to develop an effective response to the energy bill increases.

“We will carefully assess the mitigation measures the UK Government has announced today and how they will be applied in Scotland, but I am concerned that the majority of these measures are not sufficiently targeted to provide support to those who need it most, and that the proposed £200 rebate is too little too late, applying 6 months after the coming price rise in April. This serves only to delay, rather than solve, the very real and growing cost of living crisis. Direct support for those who need it most is required.

“Collaboration between the four governments of the UK must be a vital component of any effective response to this serious situation and, therefore, while we will consider how this proposal will work to mitigate household energy bills, it remains deeply disappointing that the UK Government has failed to engage us in finding the best possible solution for the people of Scotland.”

Scottish Greens energy spokesperson Mark Ruskell MSP said: “The Tory cost of living crisis is absolutely out of control. While Boris Johnson’s government is preoccupied with sleaze and scandal thousands of households in Scotland and across the UK are being plunged into poverty.

“We know that the long-term causes of the energy price hike stem from the Tories ‘cutting the green crap’ under David Cameron which has led to an overreliance on gas to heat homes and a failure to properly invest in renewable energy and home insulation. I am pleased that with Greens in government here in Scotland we’re seeing action to address these longstanding issues.

“However, the current devolution settlement means only the UK Government has the power to act in the face of these obscene energy price rises now. Most people simply cannot afford a 54 per cent increase in their energy bills. Tory proposals to offer loans to cover the costs or to spread the costs over future bills simply won’t do, especially when there is no certainty about future prices.

“The public have a right to expect serious answers from the UK Government in the face of this crisis, but there seems little sign of those coming any time soon.”