The regulator Ofgem revealed on Thursday that the price cap on energy bills for the majority of UK households will experience an upward adjustment this winter, exacerbating the ongoing cost-of-living challenges.
Ofgem clarified in a statement that bills are set to rise from January, with the surge attributed to the upward trend in wholesale energy prices, notably influenced by Russia’s involvement in the conflict in Ukraine.
Ofgem added that the annual charge for an average household consuming both electricity and gas will rise to £1,928 ($2,418) from £1,834.
‘This is a difficult time for many people, and any increase in bills will be worrying,’ noted Ofgem chief executive Jonathan Brearley.
Inflation, as measured by the Consumer Prices Index, experienced a sharp slowdown to 4.6 percent last month, credited to a decrease in energy bills, successfully achieving the target set by Conservative Prime Minister Rishi Sunak to halve the crucial figure.
Even with the elimination of last year’s expensive subsidies, households and businesses persist in facing elevated energy bills, coupled with double-digit food-price inflation.
A budget update from finance minister Jeremy Hunt, accompanied by a warning from the Office for Budget Responsibility on Wednesday, highlighted the prospect of Britons experiencing a record decline in living standards in 2024-2025.
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The fiscal watchdog forecasted that real household disposable income per person is expected to witness the most substantial drop since records were initiated in the 1950s, with no anticipated recovery to pre-pandemic levels until 2027-2028.
On Thursday, Chancellor of the Exchequer Hunt acknowledged that many families are still contending with difficulties.
‘People are feeling under pressure because of all the increases in inflation and shopping baskets and filling up the tank,’ Hunt told BBC radio.
‘We need to continue on the path of bringing inflation down.’
Chancellor of the Exchequer Hunt introduced growth-stimulating plans on Wednesday, aiming to win over voters for the upcoming general election.
The package included substantial benefits for workers, but Hunt also projected a considerable dip in growth and enduring high inflation.
The standout tax cut announced was the revamping of national insurance, a payroll levy shared by employees and employers, with substantial reductions scheduled to take effect from January.
In contrast, the OBR reduced economic growth projections to 0.7 percent in 2024 and 1.4 percent in 2025, a substantial decrease from the previous estimates of 1.8 percent and 2.5 percent, respectively.
Further dampening the outlook, the OBR predicted that inflation would not align with the Bank of England’s official two-percent target until the second quarter of 2025.
This entails a one-year shift from the earlier forecast, heightening the probability that interest rates will stay elevated for a more extended period, thus influencing the cost of commercial loans for consumers and businesses.