The UK’s energy cost has risen by over 50% in the last few months. This is putting a strain on budgets, affecting around 22 million households. More people cannot pay their energy bills on time, and the rate is bound to increase. While the current situation is disturbing, the forecasts are even more alarming.
Nearly a quarter of people in the UK reported difficulties in paying bills even before regulated energy costs increased. In March, about 23% of people surveyed by the Office for National Statistics found it challenging to pay their bills compared to a year ago. The survey also revealed only 37% of people said they would be able to save over the year compared to 43% who ruled it out.
In consumers’ defence, Martin Lewis has issued a warning, and the Don’t Pay UK group is demanding a reduction in energy costs, gathering support from over 100,000 people. In this post, I’ll look at why British household energy bills are so high and what can be done about it.
Why Are Bills So High?
There are several reasons British households have seen their energy bills soar. One prominent explanation is the Russia-Ukraine war, which has led to gas shortages in Europe. Russia is one of Europe’s biggest suppliers of natural gas, so when it stopped providing some European countries with their required amounts, this caused prices to rise sharply across the continent.
Although not reliant on Russia, the UK does have energy agreements with other EU countries, such as Germany, that heavily rely on Russia. And because Britain is an island nation with modest natural resources of its own, it relies heavily on imports to keep its economy going strong. Little surprise that the vast majority of British homes are heated with gas. That means that when gas prices go up, so do British households’ heating bills.
The collapse of small retail energy suppliers due to rising gas costs has also contributed significantly to higher household energy bills. Since these companies could not pass their increased costs directly back to consumers, they went out of business instead. As a result, Brits now have fewer alternatives when it comes time to choose an energy supplier and pay their bills each month.
Not forgetting that the Bank of England hiked interest rates by 50 basis points, the biggest in 27 years. This may not seem a big deal on the surface, but the effect is immense. The hike will mean people are paying more for their mortgages, credit card debt, and personal loans. It also means they’ll be paying more than they should in other areas—including energy bills.
It’s already been reported that British households have been cutting back on their energy usage due to higher prices, with some reporting bill reductions. But if other household expenses are going up, it stands to reason Brits may suffer their worst stagflation in years.
The Cap and Forecast
In April, British household energy bills rose by more than 50% in one month alone—an increase of over €693 (or £561). And while Cornwall Insight expects the average cost of electricity in the UK to peak at almost £3,582 in October 2022, this is just part of a more significant worrying trend: over 8.8 million households will be fuel poor.
You can expect this cost to keep climbing as well. The Cornwall prediction suggests that fuel bills will exceed €4,000 a year by January next year. But these caps are often exceeded due to high demand and poor planning. Therefore, these numbers will likely change.
What Can Be Done?
The crisis is a complex problem that has been building for years. The government’s failure to address this issue has led to a situation where UK citizens face high energy costs, poor service, and a lack of investment in new technologies. The current situation is unsustainable, and while many factors are at play, the solution must be found within the government.
Experts believe to address this crisis is to recognise its impacts. While the government may have been aware of some of these issues before now, it has not taken any steps toward resolving them. In fact, Prime Minister Boris Johnson’s handling of the situation has led to further problems. His refusal to acknowledge the problem made critics term his government ‘zombie.’
Some economists feel establishing a clear plan for addressing these issues is the way forward. This plan should include short-term solutions for dealing with current problems and longer-term plans for investing in new technologies that will help reduce dependence on fossil fuels and improve reliability across all power grids.
When prompted, Rishi Sunak promised to cut VAT and adopt efficiency-saving measures if elected as the next Prime Minister. He plans to tackle the energy crisis as a pandemic that needs to be contained. Liz Truss also pledges to cut taxes to help solve the energy crisis. According to her, tax cuts will help lower-income households struggling to pay their bills due to rising costs.
Lowering Energy Bills
The electricity or gas you use is calculated at a rate per unit of energy, and that cost is passed on through your bill. This means if you use more energy, you pay more—and if you use less, you pay less. So what do people do to lower their bills?
First, turn off the lights when you leave a room. If you’re not in a room for more than 15 minutes, turn off the lights. It’s a simple but effective way to keep your utility bill low. Second, invest in energy-efficient appliances. This includes washing machines, dishwashers, televisions, and other electronics. Finally, insulate your home. Insulation will keep heat inside so that it doesn’t escape through cracks or other leaky spots around doors or windows, keeping your utility bills low.