Households face possible 25% energy bill jump as winter bites

Energy bills for households in Great Britain could increase by as much as 25% in January, according to the latest analyst predictions for the energy price cap, as increasing wholesale gas prices raise the prospect of a further squeeze on household budgets this winter. Energy bills are likely to be front of mind in John Healey ’s budget on Wednesday . The chancellor and the prime minister, Andy Burnham, have talked repeatedly of their desire to give households and businesses some “breathing space”.

Energy prices, pushed higher by wars in the Middle East and Ukraine, are doing much of the squeezing. At prime minister’s questions, Burnham unexpectedly announced that he had asked the chancellor and energy secretary to “look at whether we can remove standing charges from gas bills and to report back… at the earliest opportunity”. Bills are split into a standing charge (a fixed daily amount paid by everyone, regardless of how much gas they use) and a variable fee, which depends on the amount of gas consumed.

Analysis from the Nesta thinktank estimated that removing the standing charge – and increasing the variable element of bills to compensate – would reduce bills for most households without costing the Treasury a penny. The typical household would save £22 a year, but savings would be bigger for homes that use little gas. Those that use a lot of gas would face higher bills. Jonathan Marshall, an economist at the Resolution Foundation thinktank, said that although bigger houses, which require more gas to heat, tend to be occupied by richer people , it would not be as simple as a transfer from rich to poor.

“Not all of those using lots of gas in the winter are on high incomes. A low-income family with a baby might need the heating on all of the time, for instance, and they could get stung by a removal of the standing charge,” he said. “There’s a danger of a change like this being rushed through.” Related articles: A bold budget this week will deliver the business-friendly socialism Britain badly needs The beer is going a little flat as tensions surface between No 10 and No 11 The budget could also include new support through the benefits system.

The warm home discount provides £150 towards the bills of means-tested benefit recipients in England, Scotland and Wales, regardless of how much energy they use. Doubling this to £300 would cost close to £1bn, if funded by the Treasury. “It wouldn’t be particularly well targeted at those who need it most,” said Marshall. “But it might be the best option that the government is capable of administering.” Alongside a package of short-term support measures, The Observer understands that the chancellor will announce plans for longer-term structural reforms of the energy system, aimed at reducing UK energy costs so they are closer to the European average.

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