Keep calm despite cost of living fears, say energy experts

Gas ring

Energy prices are set to go up dramatically in April. - Credit: PA

Despite warnings that families could be facing a "cost of living catastrophe" fuelled partly by energy prices, experts are today urging people to sit tight and wait to see what happens before committing themselves to expensive new deals.

Leading think tank The Resolution Foundation warned that a toxic cocktail of energy bill increases and tax rises in April could leave families struggling.

Energy bills are set to rocket with the government being forced to increase the price cap following a massive rise in worldwide gas prices - and both National Insurance and council tax bills are expected to show large increases.

The Resolution Foundation expects the average family to see energy bills increase by about £500 a year with another £100 to pay for accounts which have been switched after providers have collapsed. 

National Insurance will be increased by 1.5% to help pay for the expansion of the NHS and boost the care sector - a move which will cost the average family a further £600 a year.

Council tax bills could also see a significant rise as the government encourages local authorities to increase support for social care.

Torsten Bell of the Resolution Foundation

Resolution Foundation chief executive Torsten Bell has warned of a "cost of living catastrophe" in April. - Credit: Resolution Foundation

Foundation chief executive Torsten Bell said: “If you think about the politics of this, energy prices and taxes are always big politics in Britain.

“The fact that two such big changes are coming on top of each other in April, at the same time as our wages aren’t rising that significantly because of higher inflation in general, I think means that this is going to be the dominant story once we come out of the bad but hopefully short-lived Omicron wave.”

The volatility in the energy market has seen 28 companies collapse this year, the most recent being Ipswich-based Zog Energy in early December.

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Central Suffolk and North Ipswich MP Dr Dan Poulter was a member of the Energy and Climate Select Committee at the House of Commons before it was merged with the energy committee in 2018 - and has retained an interest in energy policy. He is also a part-time NHS doctor at a London hospital.

Dr Dan Poulter

Dr Dan Poulter said tax rises were necessary to fund the NHS and care sector. - Credit: Sarah Lucy Brown

He said: "I have seen the concerns, but there is widespread agreement that more money needs to be spent on the NHS and social care and that does have to come from somewhere.

"I understand the concerns about poorer families - but set alongside this there is a substantial increase to the National Living Wage and changes to Universal Credit which should benefit those who rely on that."

The energy cap for the "average" home was put up to £1,277 in October - and seems certain to go up substantially in April. However the exact increase is not expected to be set until much nearer the time and the government is in regular talks with energy industry bosses.

Dr Poulter said: "The price of energy can be volatile and we have had steep rises before. I know the government is trying to keep these down, quite possibly by adjusting the VAT rate for a time which would provide it with extra revenue."

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