When dozens of energy companies started going bust in 2021, the government knew it had a crisis on its hands. The rise of the energy price cap from £1,277 to £1,971 in April – an increase of nearly £700 – led to not one but two emergency support packages. By the end, £15 billion worth of subsidies and support broadly covered the price rise for Britain’s eight million poorest households. This, it now seems, is just the start of what’s needed to get them through winter.
This morning, Ofgem has announced the cap will rise from £1,971 to £3,549: an 80 per cent increase. This exceeds the roughly £1,200 of support the poorest are already receiving and raises two questions: just how much higher might the price cap rise this winter and what will the government’s strategy be to provide relief?
Boris Johnson has made clear that the second question is one for his successor, which will make these next ten days before the new leader is announced deeply uncomfortable. Were Rishi Sunak to enter No. 10 in September, we’d have a pretty good sense of what a support package would look like, given his time as chancellor saw him implement a £9 billion and then upgraded £15 billion support package which came in the form of direct subsidies, including a universal energy bill credit of £400 for every household. But the more likely person to enter Downing Street is Liz Truss and she’s hinted at doing things differently: possibly looking at a combination of tax cuts, levy suspensions and subsidies, rather than putting full emphasis on direct cash top-ups.
Either way, an emergency support package is likely to be one of the first things announced by the new prime minister.
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