Britain scrambles $12 billion to soften 54% household energy price blow

Second major increase in energy bills in 6 months, largest on record; set to drive millions of households into fuel poverty

Energy prices for millions of Britons will soar from April after a 54 per cent hike to the regulatory price cap, forcing the government to stump up 9 billion pounds ($12 billion) of fresh support for already cash-strapped households.

Responding to the record global gas prices that have sent almost 30 British energy suppliers to the wall, regulator Ofgem said the cap on the most widely used tariff would rise to £1,971 ($2,670) a year from April, the same month that taxes rise.

Finance Minister Rishi Sunak, said he had no option but to intervene to take the “sting out of a significant price shock” for around 22 million households.

Charities and economists said the impact of the price rise for access to gas and electricity would be widespread, with low-income families unable to properly heat their homes and middle-income families forced to cut back on spending elsewhere. To ease the impact, the government will now provide state-backed loans to energy providers to spread the higher costs over five years, worth £200 to consumers from October.  A £150 rebate on local taxes will also apply to around 80 per cent of households. 

Governments across Europe have spent tens of billions of euros trying to shield consumers from record energy prices, either removing taxes or supporting the most needy, after gas and power costs spiked when economies reopened from Covid-19 lockdowns. In Britain, a six-month price cap has limited the immediate impact on consumers, instead forcing the pain on to suppliers, with more than 25 going out of business since the start of 2021.

Analysts said Sunak’s attempt to delay passing on the full hit to consumers a gamble.