ENERGY bills are set to skyrocket by almost half to £1,900 as the price cap is increased.
The steep rise comes as global gas prices have surged dramatically, with ministers in disagreement about how to support those most feeling the pinch.
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There’s been a worldwide squeeze on gas and energy supplies over the past year meaning wholesale gas prices have risen to unprecedented levels.
This is due to a multitude of reasons including an especially cold winter last year, a windless summer and an increase in demand in China.
The price cap would rocket to £1,897 for average users, up from its current level of £1,277 – an increase of 48 per cent, analysis industry experts by Cornwall Insight have found.
The estimate falls only slightly short of the most dramatic forecasts suggesting energy bills could hit £2,000 this spring.
Based on forecasts for the gas price from February to July, Cornwall Insight believes the price cap is likely to rise again in October – to £2,054.46.
The wholesale prices over a six-month period that ends on Monday with the new increase will coming into force from April.
And now ministers are under growing pressure to agree on measures to help families who will be feeling the pinch from the new costs the most, the Telegraph reports.
The leading proposal is currently removing VAT from energy bills, which is currently levied at five per cent, would save £90 a year for households on a default “standard variable” tariff. The move would cost the Exchequer about £2.5 billion.
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Other measures included freezing council tax and increasing the value and eligibility of existing schemes targeted at low income households, such as the Warm Home Discount.
Government sources confirmed that all of these options were on the table, but insisted that no final decision had been made.
But cutting VAT faces opposition within the Treasury, where one insider argued that the move “doesn’t discriminate between the wealthier and less wealthy people”.
Another Treasury source stressed there were “drawbacks with lots of options” under examination.
Energy companies are braced for a huge increase in calls from worried customers once April’s rise comes into effect.
There is also concern among people in the industry that turmoil in Westminster over “partygate” may affect efforts to find a solution. It follows reports that a key meeting between the Prime Minister and Chancellor to finalise proposals had to be postponed this week.
One industry source said: “It’s really frustrating that we’ve known this has been coming for ages, we have a week to go, and we still don’t know what is going to be done.”
Another said: “We’ve all engaged with the Government to try to find a solution and we are hoping that a solution can be found.”
Pressure is growing on Downing Street and the Treasury to take action, after a minister declared on Thursday night that the Government needed to do “a lot more” to help struggling families.
Senior Tory MPs warned on Friday that slashing VAT on energy bills alone would not be sufficient to help struggling households.
David Davis, the former Cabinet minister, said the proposed move “doesn’t make up for” refusing to cancel the looming rise in National Insurance contributions.
However, he added: “Any tax reduction at this stage in the cycle is a good idea, because we need more growth to get out of the Covid depression.”
The National Insurance contribution increase is set to cost a person with £20,000 annual income an extra £130.
Someone on a £50,000 salary will pay £505 more, while a person earning £100,000 will pay £1,130 extra, according to Income Tax Calculator UK.
In 2016, the PM told The Sun that “fuel bills will be lower for everyone” if they backed Brexit.
It says: “We believe working people will be better off if we leave the EU.
“The NHS will be stronger, class sizes smaller, and taxes lower.
“We’ll have more money to spend on our priorities, wages will be higher and fuel bills will be lower,” he said.
The previously talked down the idea of a VAT energy bill cut when grilled by The Sun, insisting that it would be better to target those least well-off instead.
