'We have to live within our means': Sunak defends 'puny' Govt support amid energy crisis

3 February 2022, 11:05 | Updated: 3 February 2022, 18:09

By Daisy Stephens

Chancellor Rishi Sunak has defended the Government's "puny" support for those facing eye-watering hikes in their energy bills, saying "we have to live within our means".

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Speaking from Downing Street in a bid to "reassure" people about soaring energy costs as he outlined the Government's support for households of up to £350, Mr Sunak said he recognised it is a "difficult time".

"I know this is probably the number one issue on most families' minds, you know - they're looking at the news, they're seeing prices go up, they're worried about the cost of living, and in particular energy, and that's why we're taking action, and I really believe that what we're doing, £350, it's a significant amount of money that will make a big difference to the vast majority of households, and I think people, I hope actually, will be reassured by us stepping in to provide that support to ease the adjustment that this is."

He added the Government needed to implement the right long-term energy strategy including nuclear, offshore wind and taking advantage of domestic natural gas resources.

He said people "understand we have to live within our means", adding "I think they get that".

"They expect that from us, and that's what I will deliver as long as I'm doing this," he said.

It comes after Ofgem confirmed the energy price cap will rise by £693 per year to £1,971.

The Chancellor has outlined three ways in which the Government will help - £200 discounts on bills, a £150 council tax rebate for those with properties in bands A-D, and giving local authorities a discretionary fund of £150 million to "help those lower income households" who may live in higher council tax properties, or who are exempt altogether.

Mr Sunak told the House of Commons earlier: "The price cap has meant that the impact of soaring gas prices has so far fallen predominantly on energy companies, so much so that some suppliers who could not afford to meet those extra costs have gone out of business as a result.

"It is not sustainable to keep holding the price of energy artificially low... But what we can do is take the sting out of a significant price shock for millions of families by making sure the increase in prices is smaller initially and spread over a longer period."

But the Government's support package has been criticised for not going far enough, with millions of people set to be plunged into fuel poverty.

Labour former minister Chris Bryant told the Commons £350 in support for households to help mitigate rocketing energy prices "does not even touch it".

The MP for Rhondda said: "I know the Chancellor is all pumped up but this is pretty puny stuff to be honest - £350 isn't going to touch the sides of the problem for my constituents in Rhondda.

"Gas and electricity up for the average family in my constituency by £686. Fuel up by £314. The average weekly shop up by £385. Universal Credit cut by £1,040. National Insurance up by £150 and frozen tax allowances by him will cost another £300. That's £2875 in a constituency where the average wage is £27,000.

"That's really going to cause hardships; £350 does not even touch it."

Forecasts have suggested the annual energy bill for an average household could approach £2,000 - translating to around an extra £50 per month.

Around 4.5 million people on prepayment meters will see an even bigger increase of £708 a year.

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Ofgem said the 54 per cent increase was forced by a record increase in global gas prices.

The increase will affect 22 million customers and will come into effect on April 1 when the price cap on energy bills is updated for the next six months.

Ofgem chief executive Jonathan Brearley said: "We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can."

It follows a price cap increase in October last year, when about 15 million households faced a 12 per cent rise in energy bills.

The Bank of England has also today increased interest rates from 0.25 per cent to 0.5 per cent.

It is the latest significant price rise in the cost of living crisis, as millions of people face higher taxes and rising costs for food, fuel and other items.

A minister told LBC on Thursday that the government is "very conscious" of how the cost of living crisis will affect struggling families.

James Cleverly told Nick Ferrari at Breakfast: "We recognise the real-world impact of some of these global phenomenon.

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"We’ve already got a number of support packages in place to specifically help with heating bills.

"We’ve also got things like the change to the taper rate of universal credit, the increase in living wage, which will put about £1,000 into the pockets of working people.

"We are very, very conscious of how this will hurt some people. The Chancellor is taking a very close interest."

Boris Johnson is under vast pressure to ease the cost-of-living crisis, with his leadership under threat over No 10 parties, but the new support is unlikely to be enough to prevent energy bills rising significantly for most people.

The energy regulator said people on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year.

Prepayment customers will see an increase of £708 from £1,309 to £2,017.

The announcement has been criticised by many, with one small business owner saying she was running her business "wrapped in a blanket".

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"Having clawed my way out of food bank poverty, here I am, three years on, running my business wrapped in a blanket," said Kerry Mackay, owner of sustainability company ScrubbiesUK.

"This sharp increase in energy prices is a massive blow to businesses and people around the UK."

Jade Newman, founder of Newport-based jewellery company Earth Symbols, said her energy bills at present were half the amount of her mortgage - and with April's price rise it would only get worse.

"Being able to heat your home or cook your meals shouldn't be a luxury that only a select few can afford," she said.

Uswitch.com said it was "the toughest energy price hike in recent memory" and that the Government could not shield people from the impacts.

"The severity of the energy crisis is now becoming a reality for 22 million households," said energy policy expert Justina Miltienyte.

"This is the toughest energy price hike in recent memory and brutally comes at a time when other essential bills are rising.

"While the Government will try to soften the impact of this rise, there’s no getting away from the fact that this is going to have damaging consequences for households."

She said the expected measures from the Chancellor were just "sticking plasters", and urged people to check their eligibility for schemes and grants.

Utilita - which markets itself as the UK's only energy supplier created to help households use less energy - said the announcement would "instil fear" in millions of people.

"Despite the rising price of wholesale energy, a spike of this magnitude could still have been avoided had the regulator not made grave errors, despite suppliers’ warnings," said Bill Bullen, founder and CEO.

Mr Bullen said, had the Government "taken notice" of a white paper submitted by Utilita which gave a blueprint to help people save energy, "all households would be on their way to making vital savings by now".

"But instead, the Government is introducing ill-targeted financial measures that won’t go far enough," he said.

Fire safety organisation Electrical Safety First warned people may be forced to use plug-in heaters to heat single rooms instead of using central heating to heat their whole property.

"Consumers have real concerns about the cost of heating at this very difficult time and we anticipate millions more will turn to portable plug-in heaters in order to reduce costs," said chief executive Lesley Rudd.

"Our research has shown millions are set to heat single rooms in their home rather than turning on the central heating system as the cost of energy soars."

Ms Rudd urged people to be "cautious", recommending that they never leave them unattended when switched on, and that they keep them away from flammable fabrics.