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Scale Of Energy Bill Debts Threatening Millions Will "Eclipse" Support Measures, MPs Warn

Scale Of Energy Bill Debts Threatening Millions Will 'Eclipse' Support Measures, MPs Warn

MPs have called for urgent action to help households

3 min read

Millions of people could be left with "unmanageable debt" as a result of major forecasted rises in the cost of energy, a new report from the Business, Energy and Industrial Strategy Committee has warned.

It is expected that continued rises in wholesale gas prices could mean the energy price cap – the maximum a supplier can charge an average customer – could reach £3,244 in October, with further rises expected in January.

But MPs on the cross-party committee warned in a new report that the current support package, which provides all households with a £400 discount on energy bills in October, and a further means tested payment of £650, was announced when the cap was only forecast to hit £2,800, and is likely to be insufficient. 

The package, announced by then-chancellor Rishi Sunak has already faced criticism from some Conservative MPs, with calls for VAT on energy bills to be scrapped or a pause on the green levy, which is added to all bills.

Leadership candidate Liz Truss has now pledged to temporarily scrap the green levy if she becomes prime minister in September as part of plans to tackle the cost of living. Sunak has refused to say whether he would take any action on the renewable energy subsidy.

But urging ministers to take urgent action to protect households, the committee warned that wages were already struggling to keep up with the 40-year high inflation rate of 9.4 per cent, adding that energy costs were having a significant contributory effect on the rise.

"Once again, the energy crisis is racing ahead of the government," committee chair and Labour MP Darren Jones said.

"To prevent millions from dropping into unmanageable debt, it's imperative that the support package is updated and implemented before October, when the squeeze will become a full-on throttling of household finances and further tip the economy towards recession.

"We were told by a number of witnesses, 'if you think things are bad now, you've not seen anything yet'. This winter is going to be extremely difficult for family finances and it's therefore critical that public funds are better targeted to those who need it the most."

MPs urged ministers to consider introducing a social tariff for vulnerable customers, adding that it was "unacceptable" that many low income households had been pushed on to more expensive pre-payment meters as a result of disconnecting pay-monthly energy accounts they are unable to keep up with. 

Jones added: "It's an injustice that the poorest households continue to pay higher energy costs because they're on prepayment meters. This must end and a social tariff should be brought forward.

"Ultimately, ministers know that the long-term solution is to reduce our need for energy through insulation works that keep our homes warm in winter and cool in summer. If the government is really taking this energy crisis and the country's net zero targets seriously it will come forward with a bold, fully funded, national home insulation programme before the end of the year."

Matt Copeland, head of policy and public affairs at fuel poverty charity, National Energy Action, said the recommendations in the report would have to be implemented "urgently" by the next prime minister.

"Energy prices continue to spiral, and vulnerable households in the energy market are being hardest hit," he said.

"It is vital that the plans from the UK government and Ofgem are scrutinised by Parliament, and they act on this credible set of recommendations to help the poorest households through the energy crisis, this winter and beyond."

A BEIS spokesperson said: “No national government can control global inflationary pressures; however, we have introduced an extraordinary package of support to help households, including £1,200 each for the most vulnerable households. We are also investing £6.6 bn this Parliament to improve the energy efficiency of homes, delivering savings of £300 a year on average.”

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