This is because the war in the Middle East is driving up energy prices, which is putting more strain on household budgets.
On Monday, the Prime Minister said that he would be giving more help to rural communities that rely on heating oil.
The Ofgem price cap, which is set and enforced by the energy regulator, does not apply to homes that use heating oil. Without a cap, suppliers can raise prices whenever they want based on changes in the wholesale market.
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Last week, the Competition and Markets Authority said it had heard that “existing orders for heating oil were being canceled, and customers were then being given new quotes at prices that were much higher.”
Starmer said that this “kind of behavior is completely unacceptable” and that it was “clear this market is under regulated.”
He said he would “put that right to make sure customers get a better deal” and that there would be £53 million in help for “vulnerable heating oil customers” and “households that are most exposed” to the price increases.
The Government has said that local governments will start giving this out to customers on April 1 in places where oil heating is more common.
Starmer has also said that suppliers who cancel orders or raise prices more than their own costs will face fines. He said, “There will be legal action if the companies broke the law.”
On Monday, he said that the government is giving a legal direction to the energy companies to make sure that every penny of the savings we made through last year’s budget goes directly to customers to keep bills as low as possible.
Will the government do more?
At a press conference on Monday, Starmer said he was “not ruling anything out” when it came to giving more help with energy bills.
His words are similar to what Energy Secretary Ed Miliband said on Sunday to the BBC: that the government was “preparing for all eventualities” and “learning the lessons of the last crisis.”
Miliband also said that he “wouldn’t let prices rise to the levels they were at in 2022, when average household bills were about £3,500 a year before the conservative government stepped in.
But he wouldn’t say what kind of help would be given, telling Sky News, “I’m not going to guess how help will be given if we do, if we make more interventions.”
The background is important. The Institute for Fiscal Studies (IFS) says that between February 28, when the fighting started, and March 12, wholesale gas prices went up by 67% and oil prices went up by 35%.
Cornwall Insight, an energy consulting firm, says that the Ofgem price cap will go up from £1,641 a year to £1,826.70 for the average dual-fuel household starting in July. This is about an 11% rise based on current prices.
What might the government think about?
There are a few options being talked about internally, but no one has officially agreed to any of them yet.
Targeted support:
The i Paper said on Friday that the Government is thinking about a targeted program for people who will have the hardest time with higher costs.
Chancellor Rachel Reeves told The Times on Saturday that the Government was working on different ways to protect people, including more targeted support. This means that this is possible.
The paper also said on Sunday that this kind of plan could focus on people who are getting benefits or pensions, like the warm home discount scheme, which gives about six million low-income households £150 each winter.
Universal support:
The IFS has said that the support package that was put in place after energy prices went up after the Russia-Ukraine war started in 2022 should not be repeated. This package included a direct grant for households and a subsidy on energy bills.
The National Audit Office said the package cost taxpayers £44 billion. The i Paper said that ministers are hesitant to do it again, and this week Reeves said that the Government is instead focusing on more targeted options.
The IFS said, “More targeted cash payments that don’t change energy prices would help the Government give help where it is needed in a more cost-effective way.”
Fuel duty:
A 1p increase is planned for September, a 2p increase for December, and a 2p increase for March 2027. This will undo a 5p cut that was made during the 2022 energy crisis.
The i Paper said earlier this month that the Treasury is thinking about canceling the September increase because of the rising cost of fuel during the crisis as a whole.
Ed Miliband has also said that the rise is being looked at again. On Sunday, he told the BBC, “We don’t know how long this conflict is going on, so we will have to see where we are in five months.”
Who can get help
The £53 million package that was announced on Monday is only for homes that use heating oil and are not covered by Ofgem’s price cap. There have been no more plans for wider support.
The Times said that one idea being talked about is to focus future support on pensioners and people who get benefits, like the warm home discount scheme.
People who get pension credit or other means-tested benefits, like housing benefit or universal credit, usually get that payment automatically added to their electricity bills every winter.
However, the IFS has warned that the government’s finances are so tight that any larger effort to help with bills will need to be carefully planned.
