Ofgem energy price cap announcement means bills likely to rise

Ofgem's energy price cap announcement means electricity and heating bills are likely to rise by an average of £693 per year for households across the UK, the single parent charity Gingerbread said on 4 February 2022¹. The Resolution Foundation put the same figure as a £693 a year rise in typical energy bills, announced by Ofgem for 1 April². The rise triggered a package of measures from the Chancellor, Rishi Sunak, described by Gingerbread as "designed to limit the impact of rising costs on households"¹.

The support includes a £200 repayable discount on energy bills in the Autumn, a £150 Council Tax rebate for some households, and additional funding towards the local authority administered Household Support Fund for lower income households¹. The Resolution Foundation put the total at £9bn and described it as an energy bills rebate plan, noting that over half of it is actually loans². It said the rebates cover half of the rising energy bills costs for many, but leave the poorest households in Britain facing a massive hit from April, because the Chancellor opted for a near universal approach using council tax rather than Universal Credit to direct funds². One in eight poor families will not get the £150 Council Tax rebate, it added².

Gingerbread said the measures are unlikely to scratch the surface of the financial iceberg due to hit many single parents from April¹. It cited Joseph Rowntree Foundation analysis that single parent households will soon expect to pay 22% of their household income, after housing costs, on energy bills, and New Economics Foundation estimates that single parent households will be among the hardest hit family types, expecting to see their bills rise 56% faster than the average¹. It said 75% of single parents are in receipt of Universal Credit¹.

Gingerbread called on the Government to increase benefits, including Universal Credit, by 6% in April to align with the projected rate of inflation, instead of the current 3.1% expected increase¹. The Resolution Foundation said the Bank of England forecast the previous day that disposable incomes will slump 2 per cent, which it said would be the largest annual fall on record, with figures going back to 1948².

Why it matters for households

The cap rise takes effect from 1 April 2022². For a household on typical energy use, the change is an average of £693 a year on electricity and heating bills¹. The support measures arrive at different points: the £150 Council Tax rebate and the Household Support Fund funding sit alongside a £200 discount on energy bills in the Autumn, which is repayable¹. The Resolution Foundation's assessment is that the package eases the pain for many but is not enough for the poorest households, and that one in eight poor families will not receive the council tax rebate at all². Gingerbread's figures point to single parent families facing a larger proportional hit than average, with 1.8 million single parent families in the UK and 75% of single parents receiving Universal Credit¹.

What happens next

The energy price cap change takes effect on 1 April 2022². The £200 energy bills discount is due in the Autumn¹. On benefits, the expected increase is 3.1%, against Gingerbread's call for 6% in April to align with projected inflation¹. The Resolution Foundation said the Bank of England forecast on 3 February 2022 that disposable incomes will slump 2 per cent².