UK’s energy crisis could “force millions into poverty” as government Covid support ends

An increase in wholesale gas prices has left the UK in an energy crisis, with concerns that vulnerable households will struggle to make ends meet as the country recovers from the fallout of the Covid-19 pandemic.

As of 1 October, those on default tariffs paying by direct debit will see an increase of £139 from £1,138 to £1,277, and prepayment customers will see an increase of £153 from £1,156 to £1,309.

The crisis has seen wholesale prices rise significantly since the start of the year. The last energy crisis to affect the UK occurred in 2018, again due to rising wholesale prices.

Fourteen energy companies have left the market since August as a result of recent gas price rises, which means customers risk being switched to alternative, and potentially more expensive, providers.

Industry regulator Ofgem says more suppliers “than usual” may exit the energy market. It says it is “working closely with government and industry” to minimise disruption to customers.

The increase in costs comes at the same time as government cuts to Universal Credit, and the end of the furlough period from the pandemic, sparking concerns that vulnerable families already struggling will be forced into poverty.

Rochdale MP Sir Tony Lloyd has criticised the government for being “uncaring and incompetent” amid concerns that the increase in energy prices will force ‘millions of low-income families’ into poverty.

Mr Lloyd is one of 22 cross-party Members of Parliament to co-sign an Early Day Motion (EDM), pressuring the government to 'increase regulation and public ownership of private energy provision' to ensure 'better investment in infrastructure, a faster switch to renewable energy, better staffing terms and conditions, and lower consumer bills.'

The motion also states that 'public financial support for energy providers should come with clear conditions, including restrictions on elements of the private operating model such as dividend payments, excessive CEO remuneration, and with the option of public provision in the energy sector.'

Mr Lloyd said: "The government were warned well in advance that their over reliance on market forces and their welcome to companies in the energy market who simply weren't up to the job, has left the people of this country in jeopardy as energy prices rocket upwards. They are incompetent.

"Recent rocketing energy costs will push some 1.28million people on low incomes into poverty. It comes at the same time as the Conservatives force through the £1,040 a year cut to Universal Credit, and the end of the Coronavirus Job Retention Scheme.

"Next year will also see an increase in National Insurance payments. The Conservative government appears to be oblivious about the impact of this on families, or seems uncaring.

"Meanwhile, British Gas doubled its half profits this year whilst increasing energy bills and pursuing a shameful fire and rehire campaign within its own highly-skilled workforce.

"People are fed up of being ripped-off, as recent polling suggests, with support for public ownership of energy increasing in recent years.

"That is why I have signed a Parliamentary motion putting pressure on the government to scrap these cuts and increase regulation and public ownership of private energy, which will lower consumer bills and deliver a better investment in infrastructure and a faster switch to renewable energy."

Customers of failed suppliers who are switched to a new supplier are protected by the energy price cap.

This is a government scheme which protects millions of people from sudden increases in global gas prices and limits the amount an energy supplier can charge those on default or standard variable rates.

Suppliers cannot charge customers of failed suppliers more than the level of the price cap.

The energy price cap is reviewed twice a year based on the latest estimated costs of supplying energy and it was announced in the summer that from 1 October, the cap would rise due to higher wholesale gas prices.

The price cap is next due to be updated in April 2022.

Help if you’re struggling with energy bills

During the pandemic, government and Ofgem have agreed emergency measures with suppliers, including fresh commitments to support people most in need this winter.

Suppliers must work with you to agree on a payment plan you can afford under Ofgem rules. This includes reviewing a plan you have agreed before.

You can ask for:

• a review of your payments and debt repayments
• payment breaks or reductions
• more time to pay
• access to hardship funds
• Priority Service registration – a free support service if you are in a vulnerable situation.

You might also qualify for the government’s:

• Winter Fuel Payment – a £100 to £300 fuel payment for people born on or before 5 October 1954.
• Cold Weather Payment – a £25 payment for every 7 days of very cold weather between November and March.
• Warm Home Discount – a £140 discount for some people getting Pension Credit or some people in low-income households.
• Household Support Fund - a funding package to help vulnerable households this winter. Contact the local council for advice and help on accessing the fund.

The Fuel Direct Scheme can also help you repay a debt from benefit payments. Contact Jobcentre Plus (or your pension centre if you’re on Pension Credit) to apply.

Let's Talk has a benefits eligibility checker. It includes benefits guidance if you’re affected by coronavirus.

For more advice, see Ofgem's guide on help with energy bills.