Energy Price Cap Rises to £1,723 as Electricity VAT Goes to Zero
The cap rose 4% this morning, about £60 a year or £5 a month, taking a typical dual-fuel bill to £1,723 for roughly 20 million households. Gas does the damage, up 8%, while electricity holds broadly stable only because VAT on it falls from 5% to zero today and stays there until 31 March. Households that use no gas face a rise of under 1%.
Prepayment customers go from £1,620 to £1,678, those on standard credit from £1,796 to £1,861 and Economy 7 from £1,039 to £1,046. Without the VAT removal this morning’s figure would have been about £45 higher, and the discount is applied automatically, reaching the eleven million households on fixed tariffs as well. The Energy Secretary Miatta Fahnbulleh said the cut “will give households some much-needed breathing space”, following “the £150 of costs we removed from bills earlier this year”. The Prime Minister said the energy bill is “the one they dread the most” and that he does not accept “it has to be this way”, having conceded on Wednesday that there was not “huge room for manoeuvre”. A coalition of charities and think tanks including the Joseph Rowntree Foundation has written to the Chancellor arguing that the VAT cut “does not go far enough”. The January forecast is £1,999, a 16% step rather than a £5 one. Watch whether the VAT holiday is extended on 28 October.