British Prime Minister Rishi Sunak has warned that households in the UK may face an energy crisis this winter, with expected energy bills of up to £2000. Sunak stated that he will consider measures to alleviate the situation, but this is limited by Britain's poor public finances. He noted that the situation in the Middle East is of great concern and that he discussed this issue with the US President.
According to data from Cornwell Insight, a UK-based energy consultancy, typical energy bills are expected to rise by 16% in January, which is the largest increase in four years. This represents an additional £276 on the average bill, bringing the total to £1999. This forecast comes ahead of an expected price rise under the UK's energy price cap, set by Ofgem, the gas and electricity market regulator.
The UK's energy price cap is set to rise by 5% on Thursday, equivalent to around £60 per year, bringing the total annual bill to £1723 for a typical household using both gas and electricity. This increase is attributed to the conflict in the Middle East, which has led to a decline in gas storage levels across Europe. It may take time to rebuild these stocks, meaning energy bills may remain high for an extended period.
Data from Ofgem shows that British households are already struggling to pay their energy bills, with a total of over £5 billion in unpaid bills and charges owed to suppliers. To help mitigate the rising cost of energy, Sunak has announced some measures, including the removal of value-added tax (VAT) from domestic electricity bills, providing an average saving of £45 per year for households.
However, this VAT reduction is set to expire in April. Ofgem has proposed a plan to alleviate debt, which could see the debts of around 200,000 people cleared if they make an effort to pay off what they owe. Since Labour came to power, the UK's energy price cap has risen by £155, from £1568 to £1723.
According to the Institute for Fiscal Studies, a think tank, taxes and charges on energy bills, excluding VAT, have risen by 59% in real terms between 2017 and 2025. By 2025, these taxes are expected to account for around a quarter of the average household electricity bill. This proportion has since fallen to around 17%, as the government has shifted some net-zero costs to general taxation.
The UK government faces pressure to address the rising cost of energy, with many households struggling to pay their bills. Sunak's comments come as the government considers further measures to support households and mitigate the impact of the energy crisis.
Key points
- UK households may face energy bills of up to £2000 this winter
- The UK's energy price cap is set to rise by 5% on Thursday
- British households owe over £5 billion in unpaid energy bills and charges
