The Chancellor has said even those earning around £45,000 could struggle to cope with skyrocketing prices, as the latest price cap forecast show bills could surpass £7000. 

The energy price cap, which is set to nearly double from already record highs at the start of October, could reach more than £5,600 by the start of next year, and then rise even further, under the latest estimates.

 

Families could face destitution over the winter if they have to pay 24.37p per kilowatt hour for the gas they burn to keep their homes at a liveable temperature. The price is currently 7.37p, already higher than ever before.

Nadhim Zahawi said things will be “really hard” for middle-earners, as well as the most vulnerable, as the energy price cap is set to rise by over 80% by October.

He said he is working “flat out” to draw up options for a plan of action for the next PM so they can “hit the ground running” when they take office in September.

In an interview with The Daily Telegraph, he said he is exploring ways to ensure “we help those who really need the help”.

“My concern is there are those who aren’t on benefits,” he said.

“If you are a senior nurse or a senior teacher on £45,000 a year, you’re having your energy bills go up by 80% and will probably rise even higher in the new year – it’s really hard.

“If you’re a pensioner, it’s really hard. So Universal Credit is a really effective way of targeting, but I’m looking at what else we can do to make sure we help those who really need the help. We’re looking at all the options.”

The newspaper said he refused to rule out freezing the energy cap as suggested by Labour, insisting “nothing is off the table”.

But he said: “My concern about it is that it is universal. You’re helping wealthier households, households like mine, where we can withstand the additional pressure of high energy costs, and that takes away from your ability to be resilient over the long term.

“It would be about £100 billion in about 18, 24 months. If I targeted that help, I’d be able to deliver more help to the most vulnerable.”

He also reportedly said he is weighing up potential action to help small firms including Covid-style cuts to VAT and business rates to support the hospitality and leisure sectors.

“If we don’t help those small and medium enterprises, my concern is the scarring effect, the longer-term scarring effect on the economy,” he said.

“So what we did on business rates, what we did on VAT for particular sectors like hospitality. So we’re working up all those options to look at those.

“And of course Liz Truss has talked about removing a moratorium on the green levies for a couple of years. We’re looking at that as well, which will help everyone with about £150.”

Another option on the table is granting large loans to energy suppliers to help cut bills by up to £500 a year, the newspaper said.

The Foreign Secretary, who is the frontrunner to be the next prime minister, has promised “decisive action” to deliver “immediate support” if she wins the keys to No 10.

But she has so far been vague about what form this assistance might take besides slashing green levies on energy bills and reversing the controversial national insurance hike.

She has argued it is not “right” to announce her full plan before the contest is over or she has seen all the analysis being prepared in Whitehall.

In the worst warning yet, energy consultancy Auxilione forecast a £7,700 bill from April 2023 – with gas costing consumers 34.22p per kWh.

The forecast is an increase of £438 since Auxilione’s prediction on Friday morning, and up nearly £900 in just two days.

It comes as gas prices continued to soar on international markets, along with the price of electricity.

Almost all of the changes in the price cap are to allow suppliers to recoup the costs that they will have buying gas and electricity from the companies that produce it.

Gas prices are decisive for electricity prices because over the last year 42% of the UK’s electricity was generated by burning gas.

The cap is the maximum price that households on their supplier’s default tariff would have to pay for every unit of gas and electricity they used for the next three months.

It is calculated based on the wholesale price of gas and electricity and also includes allowances for tax, charges paid to the energy networks, green levies and social payments.

On Friday, regulator Ofgem announced that the price cap would increase from £1,971 to £3,549 for the average household starting in October. An average household is considered to be one that uses 12,000 kWh of gas and 2,900 kWh of electricity in a year.

Gas prices were set at 14.92p per kWh from October, and electricity will cost 51.52p per kWh. By April, the experts at Auxilione now expect electricity to cost 117.5p per kWh.

The price cap was previously changed twice a year, but Ofgem is now allowed to review it every three months with changes expected in January, April, July and October 2023.

UK gas prices were trading at around £6.40 per therm on Friday, around 13 times their levels before the Russian invasion of Ukraine.