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CNN Business
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The United Kingdom will soon have to find an answer to rising energy bills or risk a humanitarian crisis. But freezing gas and electricity prices over the next two winters could cost the government more than £100 billion ($118 billion), more than it spent on paying the salaries of millions of people during the pandemic.
Earlier this year, the UK government tried to protect households against 90% of expected increases in energy bills through tax cuts, energy bill concessions and direct payments. But natural gas and power prices have risen since then, as future increases are forecast.
The government will need to spend an extra £23 billion ($27 billion) to protect households against an expected rise in energy bills of around 90% by April 2023, researchers at the Institute for Government said on Tuesday. April 2024 Another £90 billion will be spent.
That has been speculated with the cost of the proposal by Scottish Power, one of the UK’s biggest energy companies. It has called on the UK government to protect millions of households by freezing their bills for two years, reports the Financial Times.
The average annual bill is currently £1,971 ($2,318) – up 54% so far this year – but is forecast to exceed £3,500 ($4,117) when the upper price limit is set for the last three months of this year on Friday. Analysts at Auxilion, a research firm, say the average household could pay £6,433 ($7,579) a year for natural gas and electricity next spring if the government does not intervene.
Scottish Power says the UK government should cap energy bills at £2,000 ($2,356) and give suppliers money to meet the much higher costs of gas and electricity in wholesale markets.
The £100-billion cost of the subsidy will come from government borrowing funded by general taxation over the next decade or so, the Financial Times said, citing unnamed sources familiar with the matter.
“It’s going to be really scary for a really large number of people,” Scottish Power CEO Keith Anderson told Scottish TV station STV, referring to the price hike on Monday.
“This is bigger than an epidemic. It is a major national crisis,” he added.
The company did not immediately respond to CNN Business’ request for comment.
The UK government’s pandemic furlough scheme, which lasted 18 months, cost about £70 billion ($82 billion). In March 2020, when businesses closed as the coronavirus pandemic broke out, the government agreed to subsidize workers’ salaries to prevent mass layoffs.
So far this year, the government has offered around £33 billion ($39 billion) in support to households to help with energy costs, through a mix of tax cuts, energy bill rebates and direct payments. The Institute for Government said in its report published on Tuesday. The UK government says it is doing more.
A spokesman for the Department of Business, Energy and Industrial Strategy said: “We know people are facing rising costs, which is why we have taken continued action to help households by phasing in £37 billion worth of support.”
“We are offering a £400 discount on energy bills this winter and eight million of the most vulnerable households will receive an extra £1,200 of support. While no government can control global gas prices, more than 22 million households are protected by the price cap, which continues to protect households from higher prices,” the spokesperson added.
But alarm is spreading across the UK energy industry. On Tuesday, Philippe Comeret, an executive at France’s EDF, a major player in the UK market, told the BBC that without more support, almost half of UK households could fall into fuel poverty from the start of next year, meaning they would lose more than 10% of their disposable income. Have to spend on energy.
Leaders of the UK National Health Service last week warned of a “humanitarian crisis”. Many people may fall ill this winter as they “face the terrifying choice between forgoing food to heat their homes and living in cold, wet and very unpleasant conditions,” they said.
Wholesale natural gas prices began to rise last year as countries reopened from their pandemic lockdowns, boosting global demand.
Russia’s invasion of Ukraine in late February and the resulting energy shortages have further pushed up prices. Western countries have banned imports of Russian coal and oil, and Europe is trying hard to wean itself off Russian natural gas.
June was the first month on record that the United Kingdom did not import any fuel from Russia, traditionally one of its main suppliers, according to data released Wednesday by the Office for National Statistics.
Eye-watering prices have caused 29 small energy suppliers in the UK to go bankrupt since last summer. Those who survive pass most of the costs on to their customers.
— Benjamin Brown contributed reporting.
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