Rising energy prices have put huge pressure on UK households, but some experts have signaled promising news ahead.
The Resolution Foundation has said average annual utility bills are now expected to be around £2,400 for 2023-2024 – significantly lower than the £3,000 forecast at the time of the autumn budget – offering a glimmer of hope to struggling families.
The year ahead will still feel tough, though, as the first thing households will notice in April is an increase in their heating and electricity payments as government support is phased out.
The Energy Price Guarantee (EPG) – which is in place to protect consumers against price increases – is being increased by £500 to £3,000, meaning average bills will be around 20% (or £400) higher than last year.
Moreover, falling gas prices are no panacea for families, who are already facing a cost-of-living crisis that is impacting many other daily necessities, including food and broadband.
Energy bill support
After a challenging and disturbing few months in the fall of 2022 – full of headlines about skyrocketing inflation and economic chaos caused by Liz Truss’s short stint as prime minister – the latest forecast will provide some relief.
Experts from the Resolution Foundation think tank suggest average energy bills will fall to a lower-than-expected £2,400 in the coming financial year.
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But the benefit won’t be felt right away because of the government policies put in place to manage the energy crisis.
The increase in the EPG from £2,500 to £3,000 in April for an average household means bills will initially rise by around 20% before falling back to just over £2,200 in October.
This is because the government is phasing out its support and is focusing more on helping more vulnerable households. Universal account support will drop nearly 90% next year, says the Resolution Foundation.
This, coupled with slightly higher living expenses, means the poorest fifth of households will receive six times as much support with utility bills as the wealthiest fifth (£840 versus £140).
Overall, however, total energy-related support for the poorest fifth is still 60% lower than this year as the government steps back to cut spending.
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The magnitude of the inflation the country is enduring is put into perspective by the fact that average bills in 2023-2024 are still expected to cost twice as much as in 2019-2020, which were just £1,200.
The British are falling behind on their bills as a result, with 10% of people missing at least one payment from a priority bill in the three months to November 2022, according to the Resolution Foundation.
This figure rises to a quarter for workers in poorer households, who bear the brunt of rising income inequality.
While it will take some time for households to feel better, the overall outlook is still more positive than expected a few months ago.
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Economist at the Resolution Foundation, Emily Fry, said: “Declining wholesale gas prices have been the big economic good news of the year so far. This will bring real benefits to families, even if it may not feel like it for a while.
“While utility bills will still rise by a further £400 next year, we are not on track to see the continued £3,000 annual bills that many feared.
“The estimated cost of the EPG next year will also fall by almost 90 percent. This will give the Chancellor a big windfall in his upcoming budget, partially offset by lower windfall tax revenues.
“The cost-of-living crisis is far from over, but falling gas prices mean things are looking less bleak than they were a few months ago.”
On Tuesday, Rishi Sunak created a new energy security department and said: “I think in the past year we have mainly seen the impact on people’s household bills when energy policies don’t work properly, when we depend on energy imported from hostile countries .
“That’s why the creation of a new department that focuses specifically on energy security and just zero is just as important.”