Energy bills in the UK are set to rise as the government seeks to reign in suppliers who are overcharging consumers. The price of wholesale gas and electricity is up by over 30% compared to last year, and this will put many households in a financial mess. If consumers are forced to cut back on heating, they will end up sick and not productive at home. This will have negative effects on the economy and will also affect people’s lifestyles.
The government can ease the burden by deferring the cost of moving consumers from insolvent suppliers to last-resort providers, which could save the government millions of pounds. It could also reduce the VAT rate on bills and move green levies to general taxation. Further relief could be targeted to the most vulnerable households. The Resolution Foundation believes that the current gas and electricity prices will hit a record high this year.
The government can ease the financial strain on consumers by a number of measures. It can defer the cost of moving consumers from insolvent suppliers to last-resort suppliers. It can reduce the VAT on bills and transfer green levies to general taxation. Moreover, the government could implement further tax relief for the most vulnerable households. Further relief could be targeted towards those struggling to pay their energy bills.
The U.K.’s energy market is a deregulated one. This means that consumers can buy energy directly from large and smaller suppliers, allowing the consumer to save money. Although this system works fine in normal conditions, the current high prices in Europe are forcing the system to be broken. The UK’s domestic fuel bills are expected to rise by huge amounts by 2022. The problem is that many consumers are not aware that they could end up paying more for their fuel.
The price of bulk gas has been rising in the past six months. Increasing demand and cold weather have been responsible for the price rise. During the past two years, bulk prices have increased 50%, but the price of electricity is still lower. These factors are also responsible for the rising cost of the domestic energy bill. The UK is a net importer of natural gas, so the UK’s bills will continue to rise just as long as the price of global oil stays the same.
The UK energy bills have already caused a crisis in household budgets, disrupted industrial plants, and brought down 28 energy suppliers. There is now a major cost of living crisis in the UK as the government attempts to curb the costs of fuel. The regulator for England, Scotland, and Wales, Ofgem, has already announced a new regulated price cap, which will apply to the domestic market. This new cap will increase the prices of gas and electricity. Despite the new regulations, households could end up paying as much as PS1925 for their annual dual fuel bill by 2022.