Jeremy Hunt says that ‘everyone will be paying more tax’
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A leading campaign group has warned that millions more Britons could be pushed into fuel poverty from April as Chancellor Jeremy Hunt looks poised to scale back Government support on gas and electricity bills as he mulls over “tough decisions” on public spending. As the Treasury scrambles to plug the £55billion fiscal black hole which has burned through its pockets, there are fears that energy bills are not as high up the list of Mr Hunt’s priorities as many struggling families may have hoped. This is likely to leave many households across the country holding their breath as the Chancellor gears up to unveil the November budget later today.
Under the energy price guarantee unveiled by Liz Truss, the UK’s shortest-ever serving Prime Minister, energy bills for typical households were set to remain frozen at £2,500 for two years. But in one of his first decisions as Chancellor, Mr Hunt said the scheme would end in April, marking just one of a number of policies he tore up as he scrambled to calm the markets after his predecessor Kwasi Kwarteng sent them into chaos.
Mr Hunt is now set to announce a new price cap, which is expected to rise to around £3,000 to £3,100. But the Chancellor has promised that the most vulnerable households will receive more targeted support.
This also comes after Mr Hunt warned that the Government’s subsidising of energy bills can’t go on “indefinitely”, arguing that energy support for households was costing as much as the entire NHS. He told The Times: “We have to be honest with people; it’s not possible to subsidise people’s energy bills indefinitely.”
He later added: “In the end, if we want to be a low-tax economy we’ve got to find a way of not ending up with an entire second NHS in terms of the cost of our energy bills … which will drag down growth and so … that is something that you can expect to hear a lot about when I stand up [on Thursday].”
But while Mr Hunt claims it will be difficult to help subsidise bills due to the Treasury’s stretched budget, Alice Harrison, fossil Fuels Campaign Leader at Global Witness, argues there is a simple measure the Chancellor can draw on to provide extra support to households.
She said: “As the Chancellor battles with how to support people through a painful economic crisis, he needn’t look far for a huge pot of money – the extraordinary and eyewatering profits that the likes of BP and Shell have been enjoying over the past 12 months. This is a crisis caused by a dependency on fossil fuels and has benefitted those very companies to the tune of billions.”
While it is feared that the price cap will rise, research from energy trade bodies the Energy and Utilities Alliance (EUA) found that most people are generally in favour of keeping a price cap, which prevents the markets from setting a price.
Out of 2000 Britons surveyed by the EUA, 78 percent said they wanted the price cap to remain in place, while only 13 percent believed that the market should determine the price of people’s bills.
Mike Foster, the CEO of the EUA, said: “Energy bills are really hurting consumers now and they fear what might be around the corner, especially now that the cold weather has arrived. The British public clearly like the support the Energy Price Cap is giving them; they want it to continue. Frankly, they can’t afford for it to be taken away. The energy producers, who are raking in the cash as a consequence of Putin’s aggression, are seen as part of the problem.”
However, not all experts agree that a price cap is necessarily the best means for shielding households from skyrocketing energy costs. Money Saving Expert Martin Lewis wrote on Twitter:”The reason it is so important not to communicate that there is a £2,500 cap is it risks some people, possibly vulnerable elderly people, thinking they can keep the heat on max all winter, and they won’t pay more than a certain amount.
“There is no £2,500 cap on energy bills. Instead the new October 1 guarantee, like the old caps, limits – Daily charge (28p gas, 46p electricity) – and Unit rates (10p/kWh gas, 34p/kWh electricity). So use more, pay more. £2,500 is just what someone with average usage pays.”
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And Mr Lewis is not the only one who has voiced concerns over the price cap, with the GMB union also questioning whether the price cap mechanism is still fit for purpose.
Andy Prendergast, GMB National Secretary, said: “With more and more energy companies going bust, it’s time the government took the steps necessary to reassure workers and consumers.
“The current system is simply not working, with too many entrants to the markets proving unable to deal with the price shocks of the last month.This exacerbates an ongoing problem with significant price fluctuations exposing the lack of gas storage, leaving the UK highly vulnerable.
“Ministers need to get a grip on this before the situation gets out of control. We need to look at whether the price cap is fit for purpose and ask what extra steps can be taken to provide certainty to staff and consumers.”
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