Energy price crisis arithmetic worsens at alarming rate but Tories refuse to act: Ian McConnell

The Conservatives have appeared completely out of touch with the reality of everyday life for UK households for many years now, and have in recent times been delighting for reasons best known to themselves in their Brexit folly.

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And, since Prime Minister Boris Johnson announced his resignation last month, the party has seemed entirely wrapped up in its leadership contest, as the country’s woes grow.

It is difficult to fathom why the Tories cannot see the scale of the unfolding energy price crisis, which it seems inevitable will manifest itself in truly grim style this winter unless the Conservatives get their act together fast.

And, in the longer term, the UK’s lamentable and embarrassing lack of energy security, for which the Tories should accept much of the blame, must be addressed.

Forecasts of just how high the somewhat bafflingly named energy price cap is likely to go have in recent weeks become increasingly alarming, which is saying something.

Regulator Ofgem in February announced a 54% hike in the energy price cap for a typical dual fuel customer to £1,971 a year, and this took effect on April 1.

Energy consultancy Cornwall Insight last week said its forecasts for the energy price cap which will apply from October 1 had risen further, to £3,582.

It revealed that its forecasts for the January default tariff cap had also risen sharply, with a typical household now predicted to pay the equivalent of £4,266 a year for the three months to March 2023.

And energy consultancy Auxilione has this month projected that Ofgem could set the energy price cap at the equivalent of more than £5,000 per year for a typical dual fuel customer for the three months starting from April next year.

In the context of all these projections, it is crucial to bear in mind that the energy price cap, prior to the sharp rise which took effect from April 1, was £1,277 a year.

It is a matter of simple arithmetic to work out how much extra after-tax income a typical household on default tariffs has to find to pay for the recent and future surges in energy bills based on existing figures and the frightening projections for the cap.

Yet the Tories either continue to fail to grasp the scale of the trouble, or simply refuse to provide adequate support, or both.

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The Treasury, when leadership hopeful Rishi Sunak was chancellor, in late May increased the woefully inadequate support it had offered households previously for energy bills but continued to come up far, far short of what was required.

And this was before an already very troubling situation deteriorated dramatically.

The Treasury announced on May 26 that universal support on this front was increasing to £400, “as the October discount on energy bills is doubled and the requirement to repay it over five years is scrapped”.

And it said that “almost all of the eight million most vulnerable households across the UK will receive support of at least £1,200 this year, including a new one-off £650 cost-of-living payment”.

The differences between the prevailing per annum energy price cap before the April rise and the caps projected by Cornwall Insight from October and January are £2,305 and £2,989 respectively.

So the help of around £1,200 for the most vulnerable households trumpeted by the UK Government is woefully inadequate. This is as plain as day.

The difference between the pre-April price cap and that projected by Auxilione for next spring hardly bears thinking about, but the Tories must give all of the numbers serious thought and act appropriately.

There is talk of some further UK Government support for households laid low by soaring energy bills but the figures reported continue to look utterly inadequate. Tory leadership candidates Mr Sunak and Liz Truss look spectacularly oblivious to the reality facing ordinary households as they focus on their battle for the prime minister post.

As a proper response from the Tories remains entirely elusive, it has been left to others to highlight the scale of the problem.

Paul Kissack, chief executive of the Joseph Rowntree Foundation organisation which works to solve UK poverty, said at the weekend: “History shows that, when Britain faces a national emergency, government is at its best when it steps up and takes determined and creative action to protect people and businesses, often in previously ‘unthinkable’ ways. We saw that after the 2008 crash with the nationalisation of banks. We saw it in the pandemic with a generous furlough scheme.

“The nation faces another national emergency now, and people rightly expect the Government to act to offer protection. Instead, we are seeing a Government asleep at the wheel, and leadership contenders failing to grasp the scale and urgency of the crisis.”

MoneySavingExpert founder Martin Lewis has called on what he described as the “zombie” Government to “wake up”, highlighting the need for intervention on energy prices.

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The Conservative Government does, at best, appear to be asleep amid what is a huge crisis, and its continuing failure to fulfil its responsibilities is alarming as well as extremely frustrating.

The Joseph Rowntree Foundation at the weekend painted a clear and very accurate picture of the impact of the energy price crisis on vulnerable households hammered by protracted cuts in social security under the Tories.

Mr Kissack said: “Even before the current crisis the social security system failed to cover the essentials, degraded by years of cuts. People are already selling their possessions, taking on risky debt and building up arrears they may never be able to pay back. And things are about to get far worse.

“Planning for a substantial support package needs to start immediately. Without it, vulnerable people will face a catastrophe on a vast scale when winter sets in. The consequences of sitting idly by are unthinkable.”

Time is of the essence.

The Conservative Government should take a look up from its leadership campaign focus, at long last see what is actually going on in the real world, contemplate the scale and urgency of the crisis, and act immediately to put in place adequate support.

Recent history would suggest, sadly, that it will fail to do so.