Category Archives: cost of living crisis

Ofgem Has Changed Its Energy Cap Policy Again. Here’s Why It Matters

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Energy regulator Ofgem has confirmed a major policy change today which could impact your bills, yet again.

Now the price cap will be updated quarterly (every three months) instead of every six months, in a bid to prevent large-scale disruption.

The cap was set out in law in 2018, and reflects the maximum suppliers can charge consumers per unit of energy.

It means suppliers can only take 1.9% as profit, but it’s not a cap on the maximum bill a household can be charged, as this is based on their usage.

While it may seem like an insignificant change in policy, it will have a substantial impact on your bills. Here’s what you need to know.

How important is the price cap?

Ofgem made headlines when it raised the price cap in April, meaning every household had to pay more for their annual energy bills.

The average household had to then start paying £700 more for their yearly annual bills, raising them to a record £1,971 (it was previously £1,227).

For many, this is seen as the start of the cost of living crisis.

While the cap stops prices rising and falling dramatically for consumers as wholesale prices go up, it does mean the cost of living is likely to only get harder in the short-term.

However, when wholesale prices fall, the reductions will be passed on the customers as Ofgem should lower the price cap. This will happen more quickly with the quarterly price cap.

The cap was set to rise again come October (to a staggering £3,358 a year according to analysts Cornwall Insight) but this policy change from Ofgem means the next price cap level will be published at the end of August.

Why has this changed?

Ofgem say this change prevents the cost of both gas and electricity lagging behind changes in the market, but admits the market is currently “volatile” so the price cap methodology is to be kept under review.

Ofgem CEO Jonathan Brearley acknowledged that “this situation is deeply worrying for many people”.

He then blamed Moscow’s decision to squeeze its gas supply to mainland Europe, which has a knock-on effect for the UK.

“As a result of Russia’s actions, the volatility in the energy markets we experienced last winter has lasted much longer, with much higher prices than ever before,” he said.

“And that means the cost of supplying electricity and gas to homes has increased considerably.

“The trade-offs we need to make on behalf of consumers are extremely difficult and there are simply no easy answers right now.”

He said this change means consumers will pay the “real cost of the energy”, but added: “We will keep working closely with the government, consumer groups and with energy companies on what further support can be provided to help with these higher prices.”

Why has the change been heavily criticised?

Back in May, MoneySavingExpert Martin Lewis laid into Ofgem’s early proposals to review the price cap every three months, rather than every six.

Explaining how he had lashed out at the regulator over the suggestions in a Twitter thread, he said the changes were “a fucking disgrace that sells consumers down the river”.

He apologised for his outburst, explaining: “I should’ve behaved better. My ire’s institutional not individual, it was inappropriate.”

However, Lewis claimed the changes would bring “dire consequences for consumers”.

Cornwall Insight also predicts that the energy price cap will go up to £3,615 in January. For comparison, it was £1,400 a year in October 2021.

MPs already called on the government at the end of July to take urgent action to help households amid warnings that prices will soar this autumn.

“Once again, the energy crisis is racing ahead of the government,” said Darren Jones, the chair of the business, energy and industrial strategy committee.

“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.”

With this new policy change confirmed and the new price cap looming at the end of August, this threat of “unmanageable debt” is likely to only creep closer.

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Don’t Pay: The Campaign Group Calling On Brits To Stop Paying Energy Bills

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A campaign group is calling for people to stop paying their energy bills – and it comes as BP reported its biggest quarterly profit for 14 years.

The UK is in the midst of a cost of living crisis, with prices for petrol and gas soaring for British households. Typical household energy bills are expected to be more than £3,600 this winter, with bills set to rise again in October.

Suppliers have blamed the war in Ukraine and surging wholesale prices for the hikes, but on social media, some have dubbed the current situation “the cost of greed crisis”.

BP recorded a profit of $8.45bn (£6.9bn) between April and June, more than triple the amount it made in the same period last year. And it is not the only energy firm to report a staggering profit – both British Gas owner Centrica and rival Shell have recorded huge earnings recently, too.

Rising energy bills are one of the main reasons for the cost of living crisis. The government did introduce a one-off windfall tax on oil and gas companies in July, but it does not apply to profits announced by BP and other energy firms between April and June.

And as more households continue to struggle to pay bills, people aren’t happy – which is why the ‘Don’t Pay’ campaign is demanding action.

The campaign group is trying to get at least one million people to pledge not to pay their energy bills if the government continues with its goal to increase the price cap on October 1.

“We started this campaign because we were worried about how we will pay our energy bills. Everyone around us is struggling and we know it will only get worse with no end in sight,” the campaign group says.

“So far around 1,300 people have expressed an interest to become an organiser in their town, village and city. From there we will fan out the campaign with a local presence.”

Speaking on ITV’s programme Peston, money saving expert Martin Lewis previously warned a bill payment strike could be on the horizon.

“The big movement that I am seeing is an increase of growth in people calling for a non-payment of energy bills, mass non-payment. Effectively a consumer strike on energy bills and getting rid of the legitimacy of paying that,” he said. “It’s small at the moment, there’s a Twitter handle with about 5,000 followers.

“We are getting close to a Poll Tax moment on energy bills coming into October and we need the Government to get a handle on that, because once it starts becoming socially acceptable not to pay energy bills people will stop paying energy bills and you’re not going to cut everyone off.”

‘Don’t Pay UK’ began trending on Twitter following the BP profit release, but there are some things you need to consider before taking part in the protest.

What are the risks of taking part?

Of course, not paying your bills will have some consequences and you’ll need to look at the terms and conditions for your individual energy supplier to see what these may be.

SSE Energy, for example, says it will try to contact customers first regarding unpaid bills, but adds: “In some cases we might also try to visit you at home to work out the best way to pay, but we’ll add the cost of this visit to your account.

“We may take a case to court to obtain a warrant to enter your home. We don’t want to, but sometimes we’re left with no choice.”

Similarly, British Gas says it may do the following when met with unpaid bills:

  • Pass your details to a debt collection agency

  • Apply for a warrant to install a Pay As You Go meter to make it easier to pay back the money you owe

  • If possible, switch your smart meter to a smart Pay As You Go meter remotely.

Utility Bidder says if you haven’t paid a bill for 28 days, you cannot come to a repayment agreement and you refuse to have a prepayment meter installed without good reason, “your provider can disconnect your power supply”.

It’s worth noting that the Don’t Pay campaign is discouraging anyone on prepayment meters who face self-disconnection if their credit runs out to get involved. This also goes for those whose energy bills are included in rent and risk eviction if bills go unpaid. Instead, they want those people to support them online.

If you are struggling to afford your energy bills, you should follow the advice set up by Citizen’s Advice.

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Why Tax Cuts Have Become The Most Controversial Topic In PM Race

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Taxes – and whether they should be cut or not – are at the centre of this year’s Tory leadership contest.

The candidates have already pledged a total of £330 billion in giveaways, a sum which Labour leader Keir Starmer claimed was “roughly the annual budget for the NHS”.

He also pointed out that these hopefuls haven’t actually “found time to explain where they’re paying for it” either.

Most of the candidates were also there when the government introduced these taxes in the first place, only now “they’re acting as if they’ve just arrived in from the moon”, according to the Labour leader, as he accused them of desperately rewriting history.

The government has been heavily criticised for increasing national insurance contributions back in April, when the energy bill cap was lifted too.

With the cost of living crisis squeezing the whole country right now, taxes are at the forefront of public’s minds.

So now Boris Johnson is on his way out and Tory MPs are lining up to replace him, they’re all promising that they’ll handle the economy a little better – somehow.

Here’s what you need to know.

Who’s said what?

Rishi Sunak – chancellor up until a week ago – said he would cut taxes only once “we’ve gripped inflation”.

Nadhim Zahawi – current chancellor – intends to cut income tax in 2023 and 2024 to ease the cost of living crisis, while abolishing green levies on energy bills for two years.

Liz Truss, foreign secretary, has promised to cut taxes “from day one”.

Jeremy Hunt, former health and foreign secretary, told BBC Breakfast he would “cut all taxes”.

Current backbencher Tom Tugendhat said he wants to reverse the rise in national insurance. He said: “Tax cuts cannot be the only round in the magazine to fire growth in the economy.”

Former chancellor and health secretary Sajid Javid – who has now dropped out of the contest – said he would cut a range of taxes, and hold an emergency budget to increase support for cost of living.

Ex-minister Kemi Badenoch said she refuses to enter the “tax bidding war” with her competitors, but wants to reduce corporate and personal taxes.

Attorney-general Suella Braverman plans to slash taxes too, along with fellow minister Penny Mordaunt.

Why is it becoming an integral part of their campaigns?

The cost of living crisis has certainly added pressure to the government when it comes to cutting taxes.

However, plenty of Conservatives also want to reduce taxes to return to the more traditional idea of Conservatism: free market, reduced income tax rates and cutting the deficit.

Sunak is the main figure in the contest determined to hold onto current taxes, having been the one to champion them all as the chancellor earlier this year.

Why could cutting taxes be a good idea?

The cost of living crisis means households across the country are struggling, so reducing the amount they pay in tax would be a relief.

Energy bills are expected to rise from £1,971 up to £2,800 in October and then rise again in the beginning of 2023, according to energy regulator Ofgem.

The threshold for national insurance contributions was already raised in July, meaning people had more money in the bank this month. However, for most people this was mitigated by the 1.25 percentage point increase to NI in April to help pay for health and social care.

And, people have gradually been pushed into higher tax bands as bands have been frozen, while wages increased.

Why would it not be a good idea?

The relief could just be short-term, as tax cuts could add to inflation pressures.

Inflation is expected to soar to double-figures by autumn, if the Bank of England’s forecasts are correct.

The office for Budget Responsibility (OBR) has suggested that high taxes are needed to negate the rising cost pressures.

It predicted that debt could increase from 96% to more than 100% of GDP by 2052-53 (30 years time), according to the PA news agency.

In 50 years, it could reach 267% of GDP, unless pressures on health, pensions and social care spending along with the loss of motoring taxes, are included.

Reversing any tax increases announced this year, according to the OBR, could “put more pressure” on the already unstable public finances.

There’s also the question as to where the money for tax cuts would come from.

Lord Lamont, who is backing Sunak, told Radio 4′s World at One that the race to cut taxes is not “necessarily affordable, not necessarily rightly timed”.

Is cutting taxes the only way to help the cost of living crisis?

No, and a range of other cost of living support measures are about to kick in.

From Thursday, low-income households on benefits will receive a first instalment of £326, with the next payment of £324 coming in the autumn.

Pensioners will receive an extra £300 to help cover the rising cost of energy this winter, while people on disability benefits will receive an extra £150.

From October, households will have £400 off energy bills too.

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No Emergency Budget For Cost Of Living Crisis, Michael Gove Says

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However, sources close to Sunak quickly made clear that they knew nothing about it, and insisted no new measures were due before the autumn.

Gove suggested commentators were “chasing their own tails” and told Sky News: “There won’t be an emergency budget. It is sometimes the case that the words from a prime minister or minister are overinterpreted.

“The prime minister is right. We will be saying more and doing more in order to help people with the cost-of-living challenge we face at the moment, but that doesn’t amount to an emergency budget. It is part of the work of government.

“Last night the prime minister convened a group of ministers – we have all done work on some of the things we could do to help. Those policy initiatives will be announced by individual departments in due course as they are worked up.

“It is part of the process for a government that is always and everywhere thinking of how we can help and how we can provide support, both short term and long term.”

Lib Dem Treasury spokesperson Christine Jardine described the issue as a “complete shambles.”

She added: “Millions of families and pensioners are struggling to get by. They need more help now before things get even worse in the autumn.

“Instead all we get from this Conservative government is chaos and confusion.

“An emergency budget is needed now to cut taxes for ordinary families while taxing the super profits of oil and gas companies. That would be the fair and right thing to do.”

Johnson made his comments in a debate on the Queen’s Speech, which contained 38 bills but no immediate plans for dealing with the cost of living crisis.

He said: “My right honourable friend the Chancellor and I will be saying more about this in the days to come.

“But at the same time as we help people, we need the legislative firepower to fix the underlying problems in energy supply, in housing, in infrastructure and in skills which are driving up costs for families across the country.

“And this Queen’s Speech takes those issues head on. And above all, we are tackling the economic challenges with the best solution of all and that is an ever growing number of high wage, high skill jobs. Jobs, jobs, jobs.”

An ally of the Chancellor told HuffPost UK there were “no announcements as far as we are aware”.

They added: “Rishi has always been clear that we would set out plans for support on energy bills for autumn when we know what the [energy] price cap is going to be – but we’re not there yet.”

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Experts Tearing Their Hair Out Over Cost Of Living: ‘Country Needs More Help!’

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Two household names known for their money-saving tips have revealed their frustration at Downing Street for its latest hike in energy bills, which will push people into poverty.

From April 1, the government has lifted the cap on energy bills which will increase the average household’s annual payments by £700. It’s set to hit 18 million households and is the largest increase since the regulating price cap was introduced.

The number of households in England in fuel poverty is subsequently set to double to five million people.

This is just one of several measures which have pushed the UK into a cost of living crisis where people will have to choose between eating and heating. Council tax, water bills and car tax costs are all rising this Friday too.

It’s now at the point where every the money-saving specialists, personal finance expert Martin Lewis and anti-poverty campaigner Jack Monroe, are at a loss.

People ‘already at the brink’

Monroe, known for calling out supermarkets over rising prices and sharing their affordable recipes, appeared deeply unsettled when they told ITV’s Lorraine that “people are at the brink” already on Friday.

They said: “It all boils down to the fact that people don’t have the basic income to meet their most basic and fundamental needs.”

The campaigner added that “it’s a crisis that has been building for the last decade”, and financial aid – rather than government platitudes – is needed.

Monroe sighed when asked what advice to give to people struggling and said: “It’s getting increasingly difficult to give tips and advice because people are at the brink.”

‘Lack of compassion’ from people in charge

The anti-poverty activist also shared why this crisis is particularly frustrating, explaining: “We’re one of the richest economies in the world, people shouldn’t have to be scrabbling around for these war-time tips in order to live a decent standard of living.”

Monroe later tweeted: “If I seemed a bit strung out on Lorraine this morning it’s because I am.”

They explained that across the last decade of campaigning against UK poverty, they “have never known the scale of sheer desperation and terror that is bombarding my inboxes daily from people worried they can’t survive this crisis”.

They added: “That’s not an exaggeration; people with disabilities, people on Universal Credit, people on low wages and zero hour contracts and underemployed in insecure part time jobs, people living alone, elderly people, all literally petrified about their immediate futures.”

This means it becomes “quite stressful” when trying to give people tips because “most people are doing everything they can think of”, they tweeted, including “the most absurdly unthinkable things”.

They pointed out that the main solution is just “urgent financial assistance from those that we elected to represent us”.

They added that they’re “almost out of hope”, explaining: “I’m beyond irritated at the lack of compassion and accountability shown by those who made this happen and have the power to stop it, but are choosing not to.”

Monroe pointed towards the elected MPs and called for action – and to “get the Tories out” – over the poverty crisis.

“Enough has to be enough,” they added.

‘Never experienced anything like this before’

Martin Lewis, founder of MoneySavingExpert.com, expressed his concerns about the cost of living crisis on Thursday and explained how it had negatively affected him.

Speaking to BBC Radio 5 Live, he said: “I think the anxiety and level of sick[ness] I feel in my stomach…no-one could have my mail bag and not feel sick at the moment.

“I think the only time I can remember is the week of the pandemic before furlough was announced. When we had no certainty and there was no help… that level of panic.

“And I feel that, for the lowest-earners in society, we’re back to that. The difference is I’m not sure where the help is coming from.

“We’ve certainly never experienced anything like this before.”

Not ‘party-political’ issue but a ‘humanitarian’ one

Lewis also explained that he tries to stay apolitical, but added: “I have to be blunt, the country needs more help.

“We are a first world, rich nation, and I am on [BBC] bloody radio station talking about how people are going to survive as to whether they choose to freeze or to starve, and I don’t feel that is right.”

The expert then took aim at those making the decisions, hitting out at chancellor Rishi Sunak’s controversial spring statement.

This included promises to raise the threshold for paying National Insurance, cut the basic rate of income tax (in 2024), cut fuel duty, up household support fund and drop VAT on green home improvements.

Lewis has already criticised this mini-budget for providing “nowhere near enough” support amid the cost-of-living crisis.

On Thursday, Lewis reiterated this message: “I have said this until I’m blue in the face – the spring statement, not enough help was given.

“And we need to protect our poorest, and we also need help for people with lower-to-middle incomes who are going to see their lifestyles curtailed very substantially by this.

“This is not a party political point. This is a humanitarian point.”

He said many people have tightened their belts to the point where it could not be tightened any more – and therefore political intervention was the only solution.

“I’m sorry the frustration is coming out, but I just wish the senior members of cabinet to have my mail bag,” the consumer journalist concluded.

Sunak’s self-defence

Sunak was forced to defend himself after he announced his mini-budget earlier this week. He has been criticised for not matching benefits to the 8% surge of inflation expected this spring, and for failing to help the worst-off.

But the chancellor disagreed with the claim that “government can or should” compensate everybody, especially when global factors – such as the rise in wholesale gas prices – are involved.

He also told MPs on Monday he wanted to keep borrowing down “at a time when we are worried about the macroeconomic outlook, particularly with regard to interest rates and inflation”.

“My job is to make the right long-term decisions and my view is that an excessive amount of borrowing now is not the responsible thing to do,” the cabinet minister said.

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