Ministers are said to be considering a State-backed loan fund of £20billion mainly to help the Big Six suppliers who have soaked up extra customers from smaller firms that have gone bust. A £1.7billion loan has already been given to Bulb to keep the lights on for its 1.7 million customers. British Gas, EDF, E.ON, SSE, npower and Scottish Power now want cash to help them spread the soaring cost of gas over the next 10 years.
The Big Six gas and electricity companies say that household energy bills could double to £2,000 next year without government intervention. Ministers expect the cost of living to become one of the biggest headaches of 2022, with energy bills, interest rates, taxes and inflation all rising.
The Resolution Foundation think tank said the peak of the squeeze will be in April, when the cap on energy bills is expected to rise by about £500 a year and the cost of collapsed energy companies will add a further £100 to consumer bills.
The price rise will disproportionately affect low-income families, who spend more of their money on energy. Energy is likely to account for 12 per cent of their income, compared with 8.5 per cent now.
For the average household, the freeze in income tax thresholds and 1.25 per cent rise in national insurance contributions would cost £600 a year. Families in the top half of income distribution will pay an average of £750 more in tax bills.
Tory MPs want Chancellor Rishi Sunak to ditch plans to raise national insurance contributions in April. Senior Conservative MP John Redwood said: “Poor retail sales after Christmas may not just be about Covid but also about the coming squeeze on incomes. The Government needs to cancel the tax rises.”
Some 25 gas and electricity suppliers have entered administration since the beginning of September. Earlier this month, Ofgem said those that took on the customers of failed rivals would be able to claim back more than £1.8billion by adding it to bills.
But yesterday the regulator confirmed it was consulting on whether to spread the cost over several years instead of in one large hit. Ofgem said: “Our safety net has protected more than four million customers through the unprecedented global gas prices this year, making sure they have an energy supplier and household credit balances are honoured. This comes at a cost, which we always seek to minimise.”
The Department for Energy said meetings were being held between Kwasi Kwarteng, the Business and Energy Secretary, large energy suppliers and Ofgem.