The government is to hold emergency meetings with the bosses of the UK’s biggest energy suppliers, after providers warned on Thursday of a “national crisis” that could see bills skyrocket more than 50% to £2,000 a year.
Kwasi Kwarteng, the business secretary, is to hold virtual meetings on Monday with energy suppliers, who are pushing the government to intervene to alleviate the unprecedented rises in consumers’ bills caused by soaring wholesale gas prices.
The energy industry believes the crisis, which has seen more than 26 energy suppliers go bust at a cost of £1.8bn to date, could be made more manageable if the government axed the 5% VAT on bills imposed when the UK was part of the European Union.
Other interventions the industry would like to see considered include extending fuel grants and moving green levies from consumers’ bills into taxation.
Trade body Energy UK said on Thursday that consumers can expect their bills to soar by as much as 50% from 1 April.
While wholesale prices continue to climb steeply, the UK’s price cap on energy bills stops companies from immediately passing those costs on to their customers.
The price cap, set by the industry regulator, Ofgem, has been at a record £1,277 Since 1 October. Ofgem is expected to raise the cap significantly on 1 April. EDF has said the cap could hit £2,000 by next October, when the cap is reviewed again.
Analysts at Investec believe the expected bill increase in April would add 1.8 percentage points to inflation next year.
On Thursday the shadow energy minister, Ed Miliband, called on the government to stop families being “clobbered” with the increased cost of heating and powering their homes, by removing VAT on bills for six months.
Spain has cut energy taxes, while Germany has slashed green levies on household bills, designed to support the development of renewable energy.
But Energy UK said measures like these would save less than £300, significantly less than the expected £600 rise in the average annual bill when the price cap goes up.
One plan being formulated by the energy industry to would involve a government-administered loan scheme to spread the impact of the price increases over several years.
The plan would involve one or more commercial lenders – such as banks – covering the immediate cost of buying energy on wholesale markets at record prices, with a sum of at least £7bn. The loans would not require a government guarantee, but officials would be responsible for ensuring repayments.
Read More: Kwasi Kwarteng to meet energy leaders over energy price crisis | Energy industry