UK households falling behind on energy bills even before huge rise – business live

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Consumer champion Martin Lewis, founder of moneysupermarket.com, is on the radio now. He said for every ?100 a month that people pay on direct debit for their energy bills now, that will go up to ?181 probably at the end of August, before the new prime minister in place, and rise again to ?215 in January.

Sitting down with the energy companies is the right thing to do but ultimately it is government and government alone that can make the decision to stop the terrible cataclysmic risk millions of people in our nation face this winter and it needs to do it soon.

He said with the difference in the energy price cap likely to double between April and January, the chancellor should also double all the figures in his support package.

Liz Truss, the frontrunner to become prime minister, has pledged tax cuts, but Lewis said:

Tax cuts will not help the millions of the poorest in society who are choosing between heating and eating because they are not paying tax.

Tax cuts are not going to help the poorest pensioners, it’s not going to help those on universal credit. The dropping the green levy is a sticking plaster on a gaping wound. It’s ?150.

By the time we get to January, some people will see their bills go from ?800 to ?4,200 on the same use.

This is a national crisis on the scale we saw in the pandemic.

Greg Jackson, the founder of of Octopus Energy, said the government needs to improve its offer of a ?400 discount to households, a package that cost ?16bn.

He told Radio 4’s Today programme:

If the ?16bn package was right previously then clearly it’s not sufficient now and we need to look at a similarly significant assistance from the government for this winter.

Question: Do you think the government is on it right now?

Clearly we’re in a state of flux with the government and this needs to be the absolute top item in the intray of an incoming prime minister.

Tackling energy bills is critical to ensure people can get through this winter.

It’s counter inflationary if it’s done right.

Question: How is it counter inflationary?

If support is given on the bills through wholesale market mechanisms, then energy makes less of a contribution to inflation and that is obviously doubly beneficial. It’s going to help people through the winter when we need it and it’s going to help tackle inflation.

In an ordinary year, the energy company might spend ?1.5bn on the energy it buys to supply its customers, he said. At current prices, it’s more like ?9bn. “There is no company that can tackle this problem alone.”

The increases are going to be unmanageable for so many without the right support from the government and it’s beyond what any one company can do.

Derek Lickorish, chairman of the energy supplier Utilita Energy and former chair of the government’s committee on fuel poverty, is calling for a “social tariff” funded by the Treasury to help the poorest in society.

The situation is absolutely dire and I am astonished that we don’t see the two political contenders for prime minister declare a unity of purpose over this issue along with the current prime minister and start sorting it out. We have to do something very profound, we have to do it quickly because all the time we’re sitting here the clock is ticking and the price of gas keeps on increasing.

When Rishi Sunak announced the last package of measures to help, the closing price of gas on 26 May was 237p a therm. The day before yesterday the price of gas closed on the market at 463p a therm. That’s gone up 90%.

The time has come to put in place a social tariff to help the poorest in society and get on with it. And if we were to get on with it now we could have it in place by 1 January and we need dramatically the help that customers need for this winter and that looks like another ?800 to ?1,000 and then actually fix the problem for the fuel poor and vulnerable which looks to be 10m households.

It has to be a properly funded social tariff by the Treasury. That will cause more borrowing but is essential if we are to take the stress out of it for the poorest.

Liz Truss is talking about tax cuts, but Lickorish said the 4.5m of the poorest households who earn less than ?12,500 a year don’t pay any tax so would not benefit, nor would those on benefits.

Emma from Kent was on BBC radio 4’s Today programme, talking about how she’d been trying to clear her energy debt and saying that things would become “unbearable for so many families”.

As much as I’ve paid off a fair amount so far, I’m not going to be able to clear the outstanding amount before winter comes. With the energy prices going up in October and then even more so in January this winter is going to be tough.

I was working towards a better future and hopefully not repeating the Christmases we’ve had for the past two years. Last Christmas we were averaging a food shop once every 10 weeks if we could… I was hoping that with us both working full-time we wouldn’t have to go back to a food bank. I guess never say never. It’s going to be unbearable for so many families and to be honest I’m dreading it.

Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.

UK households owe ?1.3bn to their energy suppliers, two months before bills are set to soar by more than 80%.

The overall debt bill is already three times higher than it was a year ago, experts at Uswitch said today, and it seems likely it will grow further over the winter.

Six million homes across the UK owe an average of ?206 to their energy provider, according to the uSwitch report. In April the same average debt was ?188.

Normally at this time of year people build up credit to help even out heating bills during the winter months.

Th energy regulator Ofgem is expected to hike the price cap on energy bills to ?3,582 a year for the average household from October, according to a new forecast. Analysts at Cornwall Insight predicted further rises, to ?4,266 in January and then ?4,427 from the start of April.

Justina Miltienyte, head of policy at uSwitch, said:

Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households.

This is an alarming situation, as summer is traditionally a time when households are using less power for heating, which helps bill payers to build up energy credit ahead of the winter.

Markets are waiting for the latest US inflation figures for July, out at lunchtime. We are expecting inflation to ease to 8.7% from 9.1%, largely due to recent sharp falls in gasoline and other energy prices.

However the bigger concern is around core prices, which exclude volatile items like food and energy and are expected to rise at an annual rate of 6.1%, up from 5.9%.

In Germany, final figures show that inflation eased to 7.5% in July from 7.6% in June, but remained high.

The EUR9 rail ticket offered for unlimited travel and the fuel discount had a downward effect on the rate, as did the removal of the EEG renewables surcharge in July, said Destatis, the German statistics office.

In China, consumer price inflation is rising at the fastest rate since July 2020, at an annual pace of 2.7% last month, pushed up by higher pork prices. Food prices rose 6.3% compared with a 2.9% uptick in June. Pork prices jumped 20.2%, reversing a 6% decline in June as production slowed.

Factory gate prices eased to a 17-month low, however, despite global cost pressures, as slower domestic construction weighed on demand for raw materials. China’s producer price index rose 4.2% year-on-year, down from 6.1% in June, according to the National Bureau of Statistics.

Producer prices fell 1.3% in July from June, the first monthly drop since January, with the biggest falls in the price of metals and petrochemicals.

This is giving Chinese policymakers room to stimulate the flagging economy, in stark contrast to central banks elsewhere that are scrambling to rein in rampant inflation with aggressive interest rate hikes even as recession looms.

The Agenda

9am BST: Italy inflation for July final (forecast: 7.9%)

1.30pm BST: US Inflation for July (forecast: 8.7%, previous: 9.1%)

5pm BST: Russia inflation for July (forecast: 15.3%)