Black Thursday For Brits: Energy Bills Soar 55% As Interest Rates Hiked

Britons were today warned they face the biggest fall in living standards on record with energy bills and mortgage rates soaring – as Rishi Sunak (pictured) finally unveiled a £9 billion cost-of-living crisis package but admitted it will hardly make a dent in the pain for families.

The Chancellor announced new help in the Commons minutes after it was revealed the energy price cap is going up 55 percent for millions of people in April, meaning typical costs will rise from £693 ($945) to £1,971 ($2,688).

And as he spoke, the Bank of England pushed interest rates to 0.5 percent to control rampant inflation, which it now believes will reach 7.25 percent in April and act like a lead weight on the economy, as well as pushing up unemployment.

It cautioned that disposable incomes are on track to fall by around 2 percent – the worst impact since comparable records began in 1990.

Mr. Sunak said A-D band homes in England will get £150 council tax rebates, while £200 government-backed discounts will help temporarily keep electricity bills lower for everyone – but must be repaid over five years.

There will also be a £150 million ‘discretionary fund’ for local authorities to distribute to worse-off families.

But Mr. Sunak conceded it would be ‘wrong and dishonest’ to claim that he can take away all the pain, pointing to soaring global gas costs.

He said the ‘vast majority’ of households would see a £350 benefit – but that is barely half the average energy cap increase.

‘Without Government action, this could be incredibly tough for millions of hardworking families. So the Government is going to step in to directly help people manage those extra costs,’ Mr. Sunak said.

The policy has been delayed by weeks of internal wrangling with Boris Johnson and the Cabinet after many ministers pushed for the £12 billion national insurance raid to be delayed or axed.

Labour accused Mr. Sunak of a ‘puny’ response and a ‘buy now pay later’ approach, arguing he is merely delaying the pain.

He was also assailed by some Tory MPs, with Peter Bone branding him a ‘socialist’ in an extraordinary barb.

Mr. Sunak said: ‘We are delivering that support in three different ways. First, we will spread the worst of the extra costs of this year’s energy price shock over time. This year all domestic electricity customers will receive an up-front discount on their bills worth £200.

‘Energy suppliers will apply the discount on people’s bills from October with the Government meeting the cost in full, that discount will automatically be repaid from people’s bills in equal £40 installments over the next five years.’

Alarmingly many members of the Monetary Policy Committee pushed for a bigger rate increase to 0.75 percent. Investors are anticipating the level will reach 1.5 percent by the end of the year.

Governor Andrew Bailey said it had been a ‘close call’ but stressed there was only likely to be ‘modest’ further increases in the coming months.

He said the Bank had not acted because the economy is ‘roaring away’, but to counter the risk that inflation is becoming ‘ingrained’ domestically. The new peak is two percentage points higher than was forecast in November.

Experts are warning the cost-of-living crisis could last years, with ministers hitting the panic button amid fears it will be even more toxic to the government than Partygate.

Mr. Sunak told MPs: ‘The price cap has meant that the impact of soaring gas prices has so far fallen predominantly on energy companies, so much so that some suppliers who could not afford to meet those extra costs have gone out of business as a result.

‘It is not sustainable to keep holding the price of energy artificially low. For me to stand here and pretend we don’t have to adjust to paying higher prices would be wrong and dishonest.

‘But what we can do is take the sting out of a significant price shock for millions of families by making sure the increase in prices is smaller initially and spread over a longer period.’

He added: ‘Without Government intervention, the increase in the price cap would leave the average household having to find an extra £693, the actions I’m announcing today will provide to the vast majority of households just over half of that amount, £350.’

The Ofgem move is likely to impact 22million households across Great Britain and applies to those who are on their energy supplier’s default tariff.

‘We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can,’ the watchdog’s chief executive Jonathan Brearley said.

‘The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.’ 

Meanwhile, Labour has renewed its demand for a windfall tax on energy companies after Shell recorded an eye-watering £12billion profit in just three months.

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