Ofgem has announced that the energy price cap will rise to £1,723 per year for a typical household's gas and electricity use from October, up from £1,663 during the July to September period. According to energy consultants Cornwall Insight, the cap is forecast to climb by a further £149 per year in January, which would bring the average annual bill to £1,872 for customers of British Gas, Octopus, EDF, EON, and OVO.
Government responds with VAT cut on electricity
Speaking to reporters last week, Labour Party Prime Minister Andy Burnham acknowledged the difficulty facing households, stating: "It's difficult for people and I recognise that. But it's why, within days of taking office, I announced that we would remove VAT off electricity bills to give people that little bit of help."
The VAT removal takes effect from October. Burnham added: "We know the price cap will have an impact, but it is what we can do right now. And we'll continue to look as we go forward at how we get energy prices down in the long term, and that's what we need to do too."
Energy Secretary highlights impact of Iran war
Energy Secretary Miatta Fahnbulleh said: "Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran war. Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space."
Fahnbulleh also noted that the VAT cut has limited the rise in the price cap and follows the £150 in costs removed from bills earlier this year. She said the government will continue to examine further measures to protect families from unaffordable bills.
VAT cut reduces bill by £45, says minister
Speaking to Sky News, Fahnbulleh acknowledged the limitations of the VAT cut: "It doesn't, but it helps. So it's £45 lower than it would have been had we not acted. But look, we know that there is more that we need to do."
The £45 reduction means the October cap would have been higher without the government's intervention. The January forecast of £1,872 represents the cumulative effect of the October cap rise and the additional predicted increase, which will affect customers across all major suppliers as the colder months approach.
