UK Chancellor of the Exchequer Jeremy Hunt is set to protect Britons from rising bills by maintaining the government’s energy price guarantee at £2,500 for another three months, according to a person familiar with the matter.
(Bloomberg) — UK Chancellor of the Exchequer Jeremy Hunt is set to protect Britons from rising bills by maintaining the government’s energy price guarantee at £2,500 for another three months, according to a person familiar with the matter.
Hunt has asked energy companies to prepare for the extension, the person said, speaking on condition of anonymity. Without prolonging the guarantee, which limits what a typical household would pay on energy each year, bills would rise by an average of 20% from April 1.
The Treasury did not immediately respond to a request for comment.
The EPG was due to rise to £3,000 on April 1, and Hunt previously resisted calls to change course. He said in February that such a move would be too expensive for the Treasury. However, he’s since come under strong pressure from consumer groups and charities since to act, amid warnings of more people being pushed into fuel poverty.
Hunt is due to deliver his spring budget on March 15, and economists expect he’ll have an extra £10 billion to work with thanks to better-than-expected tax receipts and lower whiolesale energy prices. However, Treasury officials caution that the fiscal picture is still difficult and Hunt has limited room for manoeuvre.
Raising the EPG to £3,000 would have saved the government about £2.5 billion, according to consultancy Cornwall Insight.
After gas prices spiked to record levels during 2022, a mild winter has curbed power and gas demand, easing the burden on Britain’s chancellor. The cost of the government’s support package may slump to £3 billion in the next fiscal year from £25 billion during the current period, according to Investec Plc estimates.
Average domestic energy prices in the UK are capped by regulator Ofgem. Steep rises in the cost of energy pushed that cap up to £4,279 in January this year. It is due to fall to £3,280 on April — still above the level of the government’s Energy Price Guarantee.
When the price cap is higher than the EPG, as is currently the case, the government shields consumers by making up the difference. Cornwall Insight forecasts that Ofgem’s price cap will drop to £2,153 in July, below the government’s subsidy level.
–With assistance from Todd Gillespie.
(Updates with more details from fifth paragraph.)
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