UK households face another rise in energy bills

Yesterday 21:15

By: Azzat Manal

UK households face another rise in energy bills

British households are facing renewed pressure from rising energy costs, with the latest increase in the regulated price cap pushing the typical annual bill to £1,723 from October. The 4% rise comes as the government faces growing calls to provide additional support ahead of its October 28 budget.

The increase affects households in England, Scotland and Wales on standard variable tariffs. Ofgem's cap limits the rates suppliers can charge for electricity and gas, rather than setting a fixed annual bill, meaning households that consume more energy will pay more.

The government has introduced a temporary measure removing VAT from domestic electricity bills. The Treasury estimates that the change will reduce the typical annual bill by around £45 between October and December, providing some relief as wholesale energy prices remain elevated.

However, analysts are warning that the pressure could intensify in the new year. Cornwall Insight forecasts that the energy price cap could rise by 16% in January 2027 to around £1,999 for a typical dual-fuel household. The forecast, which remains subject to change before Ofgem formally sets the next cap, would represent an increase of £276 compared with the current level.

The expected increase is largely linked to higher wholesale gas prices and continuing disruption to global energy markets. Britain remains particularly exposed to changes in wholesale gas prices, which have a significant influence on household energy costs.

Higher fuel prices are adding to the pressure. Diesel prices have been approaching £2 a litre, increasing transport costs for households and businesses and potentially feeding into the prices of goods and services.

The rising bills are putting the government under pressure to consider further measures. Possible options include extending tax relief on household energy and moving some charges associated with clean-energy investment and electricity-grid upgrades from energy bills to general taxation.

Such a move could reduce the amount paid directly through energy bills, but would also shift part of the cost to the wider tax system. The government must therefore balance support for households against its broader fiscal constraints.

Finance Minister John Healey has stressed that fiscal discipline will be central to the October 28 budget, highlighting the limited room available to respond to economic shocks while managing high public debt-servicing costs.

Consumer groups, charities and trade unions have called for stronger measures to protect households, particularly those on lower incomes and people living in poorly insulated homes. The National Energy Action charity has warned that households with inefficient properties can face substantially higher annual energy costs than the typical price-cap figure.

The debate comes as policymakers attempt to shield consumers from international energy shocks while pursuing longer-term investment in cleaner energy and infrastructure. For millions of households, however, the immediate concern remains the cost of heating and powering their homes as winter approaches.