Cost of living: Three tips to save money on energy bills
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The new Chancellor’s mini-budget reversal, in which he undid much of the policies announced by his predecessor Kwasi Kwarteng, risks seeing energy bills skyrocket to £5,000. Jeremy Hunt announced on Monday that the energy price guarantee, which caps energy bills for the typical household at £2,500 per year, is now set to be reviewed next April, a year earlier than Prime Minister Liz Truss and Mr Kwarteng had originally planned for. Under the original plans, typical households were not expected to pay more than the £2,500 cap, £1,000 less than industry regulator Ofgem’s planned price cap would have cost families from October.
It came as international gas prices were soaring as a result of supply issues sparked by Russia’s war in Ukraine, as well as Russian President Vladimir Putin’s gas cuts to Europe. This has had a huge knock-on impact on UK households and threatened astronomical bill rises without intervention.
But one of the first acts as Ms Truss unveiled as Prime Minister, and perhaps one of the only measures that was largely accepted, appears to be being undone. But Mr Hunt says that the “the biggest single expense in the growth plan” needs to be scaled back.
However, this could have some damning impacts. According to Consultancy firm Auxilione, average bills could hit £5,078 without Government support. Meanwhile, RBC Capital Markets has forecast that bills could reach £4,684 a year.
With support set to end in April, Mr Hunt said help will then be targeted at the most vulnerable. However, details about the nature of this support were not included, and for most families, bills are expected to double.
Mr Hunt said there will be a “Treasury-led review” in April after the energy price guarantee scheme ends, claiming it would cost the taxpayer “significantly less than planned whilst ensuring enough support for those in need”.
Under the two-year plan envisioned by Ms Truss and Mr Kwarteng, who lost his job last Friday after the mini-budget sent the markets into chaos, the Government would have had to oversee £60billion to cover the costs.
But instead of funding the measure with a windfall tax on oil and gas companies which have seen profits soar amid the crisis, it was expected that the measure would be funded by borrowing.
However, Mr Hunt is said to be weighing up slapping a further windfall tax down on energy giants, in what would be another major U-turn on the policy commitments of Ms Truss and her former Chancellor.
The new Chancellor also warned that there could be more tax rises and spending cuts coming up, arguing that there are “eye-wateringly difficult” decisions to take as he scrambles to balance the books.
But more needs to be done in the fiscal statement at the end of the month, according to the Institute for Fiscal Studies (IFS).
IFS Director Paul Johnson did say that Mr Hunt’s new policies, while they will not “undo the damage caused by the debacle of the last few weeks”, argued that they “are big, welcome, clear steps in the right direction”.
Although he warned that “Hunt will still have to make some scary decisions on tax and spend this Halloween”, adding that “even a slightly less generous scheme could save billions, mean less government debt needs to be sold, and therefore reduce future interest payments.”
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Now, Ms Truss’ position as leader has come under question. This is due to the policies she advocated for during her election campaign “being abandoned” as Mr Hunt changes tack, with many commentators arguing that the Chancellor is the one truly calling the shots.
Ms Truss said in an interview with the BBC on Monday night that she wanted to “accept responsibility and say sorry for the mistakes that have been made”. She said: “I wanted to act to help people with their energy bills and to deal with the issue of high taxes, but we went too far and too fast.”
But despite calls for her to resign, Ms Truss said: “I’m sticking around because I was elected to deliver for this country. And that is what I am determined to do. I will lead the Conservatives into the next general election … We simply cannot afford to spend our time talking about the Conservative party, rather than what we need to deliver. That is my message to my colleagues.”
And politicians have urged for the Prime Minister to call a general election, with critics arguing that nobody voted for the policies that have been unveiled in recent weeks.
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