As we bask in the tail end of the heat wave, attention is focused on the terrifying prospect of challenging energy bills this winter.
The energy regulator is due to announce the next energy price cap for households towards the end of August, but we have already seen a massive hike so far. Although the cap has already (in May) been increased by 40%, Ofgem has warned it could rise again by 40%. But independent forecasters suggest an 80% rise. In other words, a cap of around £3,600.
That is just household heating bills. Businesses face the same prospect and of course, this does not include the cost of filling a car (although that seems to be coming off the top). And the cost of fuel translates through to higher food prices. Energy is the heart of everything we do and its cost affects our whole economy.
The Conservative leadership challenge means the government cannot make significant policy moves until a new PM is in place – September 5th. He or she will have had some plans worked up by the Treasury to select from, and both candidates agree that help households is crucial. Rishi Sunak believes targeted help to those struggling the most is the priority; Liz Truss goes for across the board tax cuts. Of course, households with the lowest incomes don’t pay taxes, and that is why I favour the targeted, Sunak approach.
We have also seen Labour’s Kier Starmer come up with a policy idea, but I can’t help feeling that his plan of maintaining a low energy cap is one that can only be proposed from the luxury of opposition. The Institute for Fiscal Studies, the widely respected independent think tank that scrutinises political fiscal policies, suggests Labour’s plan is one that will commit the government to a spend that equates to the whole of the cost of lockdown support (furlough, loans, NHS support etc) but just for 6 months. To continue with the support would be to burden the country with a colossal tax bill, even if a small part of that comes from windfall taxes on energy companies.
This is a titanic problem. We have all become so utterly reliant on energy, that looking back on the Tony Blair government’s decision not to invest in nuclear demonstrates an extraordinary lack of foresight. We are where we are – but it is not a good place.