London (Parliament Politics Magazine) – As energy prices continue to soar into 2022 the big question is, how much more can people take? With inflation estimated to rise to around 7%, many families are continuing the battle from late 2021 and having to decide whether to stay warm or feed their families.
The government has many questions to answer, who should be prioritised to be protected from the insane price hikes seen, and for how long? Who should be paying for the rise in prices, bill payers or taxpayers? And, how long should it take to rectify this sudden spike in prices, does the government demand repayment over a couple of years are spread out the cost other the upcoming decades?
But, why are gas prices so high?
A harsh winter in 2020/2021 meant that gas stores around the world were depleted and with a windless summer in 2021 the stores didn’t fully recover before entering this winter. This and the general demand for gas booming in a post-lockdown world means that prices have skyrocketed for everyone.
Every 6 months Ofgem review what is going on and set the energy cap for that period. This means the maximum amount UK suppliers are allowed to charge customers. But, with global wholesale prices still continuing to rise families in around 15 million UK homes are estimated to see another 50% rise in their energy bills.
Currently, families have been spending around 4% of their income on energy bills, and with costs set to rise to around ÂŁ165 a month more and more, people will begin to feel the effects of increased living costs.
What can the government do to help keep prices down?
The government is feeling mounting pressure from energy companies, opposing parties, and even some of their own MP’s to intervene with the rise of energy prices.
So, how could the government step in?
- By getting rid of the 5% VAT rate on household energy bills
- Cutting green levies which fund renewable energy schemes, although this bill would then be picked up by the taxpayer, just shifting the expense elsewhere.
- Increase the number of people eligible for the warm homes discount, which currently offers a one-off payment of ÂŁ140 to those eligible. This first-come-first-served service is not currently designed to withstand the number of people claiming this relief from their energy bills.
How long will the price hike last?
IS this shock to the energy system a one-off or will ever-increasing prices become the norm? Some have suggested that price hikes like we are seeing could last for two or more years, a thought that many just can’t comprehend.
The best-case scenario is that the global economy normalises and although the pandemic seems far from over as we learn to live with Covid 19, our lives will return to some semblance of normal we can only hope that the cost of heating our homes will also do the same.
