Jeremy Hunt must act now to reverse plans to raise energy bills from April, MoneySavingExpert’s Martin Lewis has warned, saying the change cannot wait until the spring budget next month.
In a letter to the chancellor seen by the Guardian, Lewis warned more than 1.7m more households could be plunged into fuel poverty if he does not urgently commit to freezing energy prices.
He said Hunt must reconsider raising the state-subsidised energy rate from April, which is set to increase bills for almost every home.
“This cannot wait until the budget – in practice, energy firms will need to know much sooner if the planned rise isn’t happening on 1 April, or they are bound to have to communicate to customers that it is coming,” he wrote to Hunt.
Hunt has so far rejected calls to extend the support, instead stressing support for the most vulnerable households. Millions of households are likely to see costs soar by 40% from April.
From April there is a planned rise in the energy price guarantee (EPG) – the discounted cost of gas and electricity to consumers – from £2,500 to £3,000 a year for the average household, despite the fact that the wholesale cost of energy has been falling.
The Labour party has also been calling for the rise in the EPG to be stopped, funded by extending the windfall tax on the profits of energy companies. That tax has brought in less than expected in receipts; the Treasury had projected it would bring in £55bn but the fall in prices has meant that projection has fallen by billions.
In his letter, Lewis said the decision to increase prices was made at a time when wholesale rates were looking to be far higher than they are now. He said the current EPG subsidy may only be needed from April to July because the underlying price cap currently looks like it may be cheaper than even the current EPG rate of £2,500 a year for a typical household.
“This means the provisioned government expenditure on the energy subsidy will be billions less than expected when the plans were made, giving significant headroom to enable a postponement. Plus, maintaining a lower EPG will also help reduce inflation,” he said.
Lewis said the guarantee was not perfect because it was broad brush, offered to even the richest households, but said it was the most efficient because it was currently the method used.
“Postponing the increase is a practical and fair decision, with household energy bills already double what they were the prior winter. Crucially, the damage to people’s pockets and mental health of another round of energy price rise is disproportionate,” he said. He cited the charity National Energy Action on the rise in fuel poverty, calling it a “frightening statistic”.
Lewis, the founder of MoneySavingExpert, was a key campaigner during the Conservative leadership race to put pressure on the government to introduce the EPG – making sharp criticism of the frontrunner Liz Truss, who initially declined to commit to support.
As prime minister, Truss introduced the EPG for two years but it was one of the casualties of her catastrophic mini-budget where unfunded tax cuts caused market turmoil. After sacking her chancellor, Kwasi Kwarteng, and replacing him with Hunt, the Treasury said the guarantee would only last till March.