From 1h ago

Calls for social tariff as many households to pay more for energy this winter

Energy charities have called for the government to introduce a social tariff to help the poorest households through the winter.

The energy regulator, Ofgem, today cut the energy price cap, meaning the average annual dual fuel bill will drop to £1,923 for households in Great Britain. However, other changes – notably an increase in standing charges and the lack of £400 in extra government support – mean that a third of English households will pay more for their gas and electricity bills than they did last year – even if the price per unit of energy is cheaper.

Citizens Advice, National Energy Action, and the End Fuel Poverty Coalition have all called for a social tariff.

Government minister Alex Bowie on Friday refused to say if a social tariff was under consideration.

James Taylor, executive director of strategy at disability equality charity Scope, said:

Energy still costs more than double what it did two years ago and bills remain excruciatingly high for disabled people.

Many disabled households can’t simply turn off nebulisers or go without energy to charge wheelchairs and hoists.

The government has broken its promise of delivering a social energy tariff. Creating this tariff in time for winter needs to be a political priority.

It is not just charities working with struggling households who think a social tariff would be a good idea. The Centre For Policy Studies, a rightwing thinktank with close links to the Conservative party, has also called for a social tariff, alongside the abolition of the price cap. It argues that the cap “discourages firms from proper competition and offering lower tariffs”, but a social tariff could prevent fuel poverty.

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Energy charities have called for the government to introduce a social tariff to help the poorest households through the winter.

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The energy regulator, Ofgem, today cut the energy price cap, meaning the average annual dual fuel bill will drop to £1,923 for households in Great Britain. However, other changes – notably an increase in standing charges and the lack of £400 in extra government support – mean that a third of English households will pay more for their gas and electricity bills than they did last year – even if the price per unit of energy is cheaper.

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Citizens Advice, National Energy Action, and the End Fuel Poverty Coalition have all called for a social tariff.

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Government minister Alex Bowie on Friday refused to say if a social tariff was under consideration.

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James Taylor, executive director of strategy at disability equality charity Scope, said:

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Energy still costs more than double what it did two years ago and bills remain excruciatingly high for disabled people.

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Many disabled households can’t simply turn off nebulisers or go without energy to charge wheelchairs and hoists.

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The government has broken its promise of delivering a social energy tariff. Creating this tariff in time for winter needs to be a political priority.

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It is not just charities working with struggling households who think a social tariff would be a good idea. The Centre For Policy Studies, a rightwing thinktank with close links to the Conservative party, has also called for a social tariff, alongside the abolition of the price cap. It argues that the cap “discourages firms from proper competition and offering lower tariffs”, but a social tariff could prevent fuel poverty.

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The government minister doing the media rounds this morning is… Andrew Bowie, the minister for nuclear and networks. (He is third in the hierarchy at the energy security department, in case you were asking.)

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He told BBC radio’s Today programme that the price cap drop was “welcome” and we should “celebrate the fact” that bills have fallen, and it was a “positive day for the British people”.

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The £40bn aid to household last winter was “well spent”, he said. However, he did not say if further support will be offered this winter – as some households will be paying more than the same point last year.

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Where it has been required, and where it’s needed, this government has always stepped up.

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A reduction of £580 from its peak is a significant drop from where the price cap was. It’s a significant drop in the amount of money that people will have to be spending on their energy bills.

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But, he acknowledged: “It is very high.”

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He said he could not comment on whether a social tariff is under consideration.

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Over one-in-three households across England – 7.2m in total – will face higher bills this winter than last, according to the Resolution Foundation, a thinktank.

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The lower price cap for October to December is – at £1,923 – lower than the effective cap of £2,100 last winter (when taking into account £400 of extra support from government). However, while the price per unit of energy is falling, this will be offset by a rise in the daily standing charge and the end of the £400 universal payments, the Foundation said.

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The people who lose out will be concentrated in the poorest households. 47 per cent of England’s poorest tenth of households will face higher bills.

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One-in-eight households (13%, equivalent to 2.8m households) will see winter energy bills increasing by £100 or more this year, rising to almost a quarter (24%) of those in the poorest tenth of families.

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Jonny Marshall, senior economist at the Resolution Foundation, said:

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Falling wholesale gas prices have finally brought the energy price cap down below £2,000. However, this is still over 50 per cent higher than families were used to before Russia invaded Ukraine, while the end of the £400 universal payments and rising standing charges mean that over one-in-three families across England will face higher bills this winter than last.

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With almost three million households set to see their bills rise by over £100 – at a time when inflation is still sky high – the government must up its game in providing longer-term support for hard-pressed families with a new social tariff for energy bills.

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It is a busy morning for the UK’s business regulators: the Competition and Markets Authority (CMA) has announced not one but two studies on British housing.

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The regulator has said it will look into concerns that housebuilders’ strategy of buying and holding of land may be anti-competitive, and concerns over the unfair treatment of tenants in the private rented sector.

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There is a fairly long list of places the regulator is looking – and it has not made any findings yet. Nevertheless, the studies will make many in the housing industry hot under the collar.

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Here are the main points for the rental sector:

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  • Zero deposit schemes – concerns over pressure selling and undisclosed commissions by lettings agents.

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  • Sham licences – some landlords are not recognising consumers’ rights under tenancies.

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  • Onerous guarantee clauses – forcing tenants to come up with extensive evidence of assets.

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  • Possible unlawful discrimination – including banning housing benefit claimants – the infamous “no-DSS” clause.

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  • Fees charged on retirement housing.

  • \n

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Brearley said many families are going to struggle. He said:

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That is way higher than the price before the crisis. Many many families are going to struggle.

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He said there are alternative options to the price cap, such as regulating differently for different companies.

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The energy price cap for households in Great Britain is to fall to £1,923 a year for the usage of a typical household, according to energy regulator Ofgem.

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The new average figure will apply from October to December. It is expected to rise again for January.

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The cap, which does not apply to Northern Ireland, was set at £2,074 for July to September.

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UK energy regulator Ofgem is expected to cut the price cap for households in Great Britain, in an announcement due at 7am BST.

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The cap, which limits what suppliers can charge per unit of gas and electricity, fell on 1 July to the equivalent of £2,074 a year for the usage of a typical household. The cap does not apply to Northern Ireland.

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Analysts at Cornwall Insight have forecast the cap will fall to an average of £1,823 a year from October.

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The Resolution Foundation shows in this graph how the maximum household energy price has moved during the energy crisis. Note the energy price guarantee, which took over from the price cap temporarily as prices surged last winter.

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Britain’s energy bill crisis is not over… 🧵

Tomorrow the energy regulator @Ofgem is expected to announce that the energy price cap will fall to ~£1,925 per year, from October to December.

Full analysis here from @FryEmily and @JMarshall_3 ⤵️ https://t.co/3dhUfINRmY pic.twitter.com/dsJW6Xk43b

&mdash; Resolution Foundation (@resfoundation) August 24, 2023

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However, bills could rise again from January, depending on wholesale prices charged to UK suppliers. European gas prices rose significantly in recent weeks because of planned strikes at an Australian gas facility. The company and the workers agreed a deal on Thursday, prompting European gas prices to drop back.

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Cornwall Insight predicted the cap could rise to an average of £1,979 in January.

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The agenda

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7am BST: Ofgem energy price cap announcement

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9am BST: Germany Ifo business climate index (August; previous: 87.3 points; consensus: 86.7)

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3:05pm BST: Federal Reserve chair Jerome Powell speech at Jackson Hole

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Key events

Filters BETA

What does the energy price cap mean for you? The Guardian’s consumer affairs correspondent, Zoe Wood, has some answers:

Some important points in there. Here is Zoe on prepayment meter customers:

The energy costs of about 4m domestic customers with energy prepayment meters who pay upfront for gas or electricity using an app or by visiting a shop are protected by the cap but it is still a slightly higher figure than for those paying by direct debit.

They used to face a bigger “prepayment premium” until the government stepped in to end it. It is funding a reduction until April 2024, with Ofgem working on a plan to eradicate it permanently after that.

And what help is available for households?

Less than before. The £400 energy support given to all households is not being repeated this year, with the government instead making cost of living payments to about 8 million vulnerable households. This includes a £900 payment for those on means-tested benefits, £300 for pensioners and £150 for disabled people.

If you are struggling, contact your supplier as soon as you can. Under Ofgem rules, suppliers must work with you to agree on a payment plan you can afford.

One important question many people will have is about standing charges: why have they risen?

That is a key reason for why more of the poorest households will pay more, even when the unit price of energy has dropped. Standing chargeshave risen from an average of £186 a year in October 2021 to just over £300.

There are two main reasons: costs have risen for the “supplier of last resort” regime which keeps supplies going when companies go bust; and costs have risen across the energy industry as part of the economy-wide inflationary pressures.

This story from March explains it in more detail:

Calls for social tariff as many households to pay more for energy this winter

Energy charities have called for the government to introduce a social tariff to help the poorest households through the winter.

The energy regulator, Ofgem, today cut the energy price cap, meaning the average annual dual fuel bill will drop to £1,923 for households in Great Britain. However, other changes – notably an increase in standing charges and the lack of £400 in extra government support – mean that a third of English households will pay more for their gas and electricity bills than they did last year – even if the price per unit of energy is cheaper.

Citizens Advice, National Energy Action, and the End Fuel Poverty Coalition have all called for a social tariff.

Government minister Alex Bowie on Friday refused to say if a social tariff was under consideration.

James Taylor, executive director of strategy at disability equality charity Scope, said:

Energy still costs more than double what it did two years ago and bills remain excruciatingly high for disabled people.

Many disabled households can’t simply turn off nebulisers or go without energy to charge wheelchairs and hoists.

The government has broken its promise of delivering a social energy tariff. Creating this tariff in time for winter needs to be a political priority.

It is not just charities working with struggling households who think a social tariff would be a good idea. The Centre For Policy Studies, a rightwing thinktank with close links to the Conservative party, has also called for a social tariff, alongside the abolition of the price cap. It argues that the cap “discourages firms from proper competition and offering lower tariffs”, but a social tariff could prevent fuel poverty.

Here is a graph from the Resolution Foundation showing that many English households will see bills rise this winter, despite the price cap fall.

You can see that the poorest households – the left-hand side – are those who will be most affected.

And the wealthiest will be least affected by increases. That is partly because their energy bills are already higher, so they are less affected by the change to the standing charge.

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🔖 NEW RF analysis of the latest @ofgem price cap shows that more than one-in-three English households will face higher bills this winter.

That rises to *almost half* of the poorest households paying more.

💸 13% of all households will be paying £100+ more than last winter 💸 pic.twitter.com/N5KnuSdBlM

&mdash; Resolution Foundation (@resfoundation) August 25, 2023

\n","url":"https://twitter.com/resfoundation/status/1694981687485317424","id":"1694981687485317424","hasMedia":false,"role":"inline","isThirdPartyTracking":false,"source":"Twitter","elementId":"2dd0c530-5851-4f6c-bd88-b561c47c85c1"}}”>

🔖 NEW RF analysis of the latest @ofgem price cap shows that more than one-in-three English households will face higher bills this winter.

That rises to *almost half* of the poorest households paying more.

💸 13% of all households will be paying £100+ more than last winter 💸 pic.twitter.com/N5KnuSdBlM

— Resolution Foundation (@resfoundation) August 25, 2023

There are some important points in our story on the energy price cap drop, from the Guardian’s Jillian Ambrose and Alex Lawson.

  • The average household will still pay almost double the rate for their gas and electricity than before Russia’s invasion of Ukraine triggered a global energy crisis. Plus, bill payers will not have the benefit of the £400 payment from the government given to all homes last winter.

  • Ofgem has produced two numbers for the new price cap after changing how it calculates the typical energy bill. The £1,923 figure is comparable with the previous quarter. However, from now on, Ofgem’s cap assumes households will use 7% less electricity and 4% less gas than in previous years, meaning a lower cap of £1,834 when expressed as an annual dual-fuel energy bill for direct debit customers.

You can read the full story here:

Minister: ‘Today is a positive day for the British people’

The government minister doing the media rounds this morning is… Andrew Bowie, the minister for nuclear and networks. (He is third in the hierarchy at the energy security department, in case you were asking.)

He told BBC radio’s Today programme that the price cap drop was “welcome” and we should “celebrate the fact” that bills have fallen, and it was a “positive day for the British people”.

The £40bn aid to household last winter was “well spent”, he said. However, he did not say if further support will be offered this winter – as some households will be paying more than the same point last year.

Where it has been required, and where it’s needed, this government has always stepped up.

A reduction of £580 from its peak is a significant drop from where the price cap was. It’s a significant drop in the amount of money that people will have to be spending on their energy bills.

But, he acknowledged: “It is very high.”

He said he could not comment on whether a social tariff is under consideration.

Back to energy bills: National Energy Action, a charity, has estimated the new price cap will leave 6.3m UK households in fuel poverty.

That is an increase from 4.5m in October 2021, just as the energy crisis started as the recovery from coronavirus pandemic lockdowns gained pace.

The crisis accelerated in early 2022, when Russia launched its full-scale invasion of Ukraine. Since then Western allies, particularly in Europe, have been rushing to secure alternatives particularly to Russian gas, meaning there is no prospect of bills falling back to pre-invasion levels any time soon.

National Energy Action also wants a social tariff – a subsidised scheme for the poorest households. That will be a familiar refrain as we approach winter, although there is little sign that the government is so far considering it.

Adam Scorer, the charity’s chief executive, said:

Any fall in the price cap is welcome but for 6.3 million households still in fuel poverty it will make precious little difference. The price cap does not protect those who simply cannot afford the cost of keeping warm. That requires direct government intervention through bill support, social tariffs and energy efficiency.

For a third straight winter, vulnerable households will face stubbornly high bills and an increasing energy debt mountain. This winter there is no Price Guarantee and no £400 Energy Bills Support Scheme. The absence of targeted further financial support this winter to reduce the energy bills of the most vulnerable will mean millions of unheated homes and spiralling debt. It will add to the queues of people for the NHS and for the overstretched resources of charities like National Energy Action.

There’s much more reaction on energy bills to come shortly, but a brief interlude to note that the FTSE 100 has gained 0.2% in the opening trades.

There is not much movement though (on the Friday before the August bank holiday in the UK): only two companies on the FTSE 100 have moved by more than 1% either way.

And investors are clearly not too worried about the Competition and Markets Authority’s study of housebuilders: there are no downward moves of note among the construction contingent.

Elsewhere in Europe, Germany’s Dax benchmark index and France’s Cac 40 are both down 0.2%.

A third of English households to face higher bills this winter – Resolution Foundation

Over one-in-three households across England – 7.2m in total – will face higher bills this winter than last, according to the Resolution Foundation, a thinktank.

The lower price cap for October to December is – at £1,923 – lower than the effective cap of £2,100 last winter (when taking into account £400 of extra support from government). However, while the price per unit of energy is falling, this will be offset by a rise in the daily standing charge and the end of the £400 universal payments, the Foundation said.

The people who lose out will be concentrated in the poorest households. 47 per cent of England’s poorest tenth of households will face higher bills.

One-in-eight households (13%, equivalent to 2.8m households) will see winter energy bills increasing by £100 or more this year, rising to almost a quarter (24%) of those in the poorest tenth of families.

Jonny Marshall, senior economist at the Resolution Foundation, said:

Falling wholesale gas prices have finally brought the energy price cap down below £2,000. However, this is still over 50 per cent higher than families were used to before Russia invaded Ukraine, while the end of the £400 universal payments and rising standing charges mean that over one-in-three families across England will face higher bills this winter than last.

With almost three million households set to see their bills rise by over £100 – at a time when inflation is still sky high – the government must up its game in providing longer-term support for hard-pressed families with a new social tariff for energy bills.

And here are the main points of the Competition and Markets Authority’s study on housebuilders:

  • Estate management charges – concerns that private housing estates can have high or uncapped charges for owners for basic amenities such as roads and street lighting.

  • Land banks – the practice of buying large amounts of land to keep for years before building has led to “concerns from some stakeholders this may be limiting competition or slowing build-out rates in some areas”.

  • Planning rules – overly complex planning rules are hindering development.

  • Regional competition – whether there is enough competition in various parts of the UK.

  • Barriers to new builders – including access to land to build on.

That adds up to quite a sweeping study – and one which will be scrutinised particularly closely by big housebuilders with significant land banks.

The findings are due in the autumn.

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Guardian

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