A cost-of-living crisis will push average household bills up to more than £ 1,500 a year, experts are warning today.
Families are now on the verge of the biggest spending cuts in nearly a decade, as bills and prices keep rising.
Financial experts have said a “perfect storm” of price and tax hikes could push family finances to the limit across the country.
Families are now on the verge of the biggest spending cuts in nearly a decade as bills and prices keep rising
Energy prices have skyrocketed this week, prompting suppliers to strike deals and predict that average households may soon have to pay more than an additional £ 400 a year on their electricity bills.
A year ago, the best one-year fixed contract on comparison site Energy Helpline was £ 855 – but last night the cheapest available was more than double at £ 1,895.
Petrol prices have also skyrocketed, with the cost of filling a 50-liter tank dropping from £ 56.55 to £ 67.30 since August last year.
Food and beverage prices in stores and supermarkets rose 1.1% in August – the highest rate since 2008 – as retailers battled supply shortages and higher costs.
A long winter meant that European countries built up lower than normal gas stocks over the summer. Russia has also supplied Europe with less gas, which many believe is a way to pressure leaders to switch to a controversial Nord Stream 2 pipeline.
Train tickets, phone and internet bills and other daily expenses also rise, while Boris Johnson’s health and social services tax means workers will have to pay an additional tax of 1.25 points percentage starting next year.
There are also fears of a sharp increase in municipal taxes – and there could be more bad news in Chancellor Rishi Sunak’s budget next month.
Insurance experts have warned that premiums will rise in January, when companies will be banned from booking their best deals for new customers.
Inflation rose from 2% in July to 3.2% last month, the biggest increase since 1997.
The perfect storm that drove the prices up
A combination of events has caused wholesale gas and electricity prices to spike, meaning household energy bills are expected to skyrocket:
- A fire earlier this week cut a key cable that carries electricity to Britain from France. The IFA interconnector in Kent can transmit enough electricity for two million homes, but it won’t be at full capacity until next March.
- A long winter meant that European countries built up lower than usual gas stocks over the summer. Russia has also supplied Europe with less gas, which many say is a way of putting pressure on the leaders to switch to a controversial Nord Stream 2 pipeline.
- The UK has very little gas storage capacity, leaving it at the mercy of imports.
- The price of tankers carrying natural gas in liquefied form has risen as Asian economies have recovered, and shipping delays have further compounded the situation. A lack of wind recently means less renewable energy has been produced. Coal-fired power plants now need to be on for Britain to keep the lights on.
The figures, compiled for the Daily Mail by Hargreaves Lansdown, show that all of this could cost average families an additional £ 132 per month – or £ 1,584 per year – in what will be the biggest increase in household spending since 2012.
Sarah Coles, personal finance analyst at the investment firm, said: “This is a spending cut at a time when the financial resilience of many people has taken a hit due to the pandemic. “
Energy companies withdrew nearly all fixed offers from sale on price comparison sites this week as wholesale gas prices hit record highs. And some believe soaring electricity prices mean some providers won’t survive the winter.
Jane Lucy, of auto-switching site Labrador, said: “It’s not unrealistic to think that at least half a dozen businesses could collapse this winter. “
The price cap of the energy regulator Ofgem protects around 15 million homes on standard variable tariffs. The cap has already increased by £ 139 to keep average standard variable tariff bills from going above £ 1,277 – but experts have said wholesale price increases mean the cap may need to be raised by a further £ 280 over the course of the new Year.
Myron Jobson, personal finance activist at Interactive Investor, says: “Consumers face a grim reality of higher utility bills during the winter months. It will cost more to power the washing machine and even take a hot shower this winter.
Laura Suter, of investment firm AJ Bell, said: “These increases will have a big impact on many families who were on the cusp of managing previously. ”