Rapid increases in gas prices over the second half of 2021 lead to record rises in energy bills, impacting millions of households all across the country. Combined with the coming increase in the energy price cap from April 2022, this is causing a cost-of-living crisis in the UK and could severely undermine the country’s economic recovery from the coronavirus pandemic.
Ofgem, the UK’s energy regulator, recently increased the price cap in August last year by 12 per cent. In April, it is expected that the regulator could increase the price cap by another 50 per cent. This could result in average energy bills rising to around £2,000 per year. This will significantly impact lower-income households and push millions more into fuel poverty.
Any response to the energy cost crisis must provide immediate support for vulnerable households and should be designed to address the long-term structural drivers of the UK economy’s exposure to dramatic energy price fluctuations. Specifically, the UK must reduce its exposure to volatile gas markets and provide further support for improving domestic housing stock’s energy efficiency and energy self-sufficiency.
This briefing sets out several immediate and longer-term recommendations below.