Photo Credit: Rupert Hartley/Bloomberg
If an answer to its worsening energy shortage is not found soon, the United Kingdom may be on the verge of a humanitarian crisis. Bills have gone up due to rising demand and a supply shortage, and if this pattern continues soon, experts predict that many customers will complain.
To improve consumer sentiment, the nation plans to freeze the cost of gas and electricity; however, doing so could cost the government more than £100 billion, or more than $118 billion.
The UK government has implemented tax breaks, direct payments, and bill rebates to protect citizens from 90% of the planned increase in energy bills among providers. However, as predicted, gas and energy bills have reached all-time highs, and the government may be unable to keep pace.
According to the Institute of Government, the government may need to reserve an additional £23 billion to protect citizens from a 90% increase in bills until April 2023. However, a larger sum, £90 billion, is required to extend that protection until April 2024.
Scottish Power, one of the UK’s largest energy companies, made the same proposal to the government. According to the Financial Times, the company revealed in one of its interviews that the government needs to freeze prices within two years in order to accommodate people. It would, however, cost them billions of euros.
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Increasing bills paid by households
Every year, a household pays more than £1,971; this figure has increased by 50% over the previous year. According to energy companies, the annual average could reach £3,500. Auxilione, a research firm, said that it is critical for the government to intervene because the current trend suggests that a household could pay as much as £6,433 per year.
Scottish Power recommended capping energy bills at £2,000 while sending aid to suppliers to help them catch up with wholesale gas and electricity costs. According to the Financial Times, the planned £100 billion subsidy to energy suppliers would be funded by government borrowing and general taxation.
The CEO of Scottish Power, Keith Anderson, stated, “It is going to be truly, truly horrific for a large number of people. This is bigger than the pandemic. It’s a big national crisis.”
The assistance of the government is badly required
Government funding as an aid to affected parties is not new in the UK. The government’s £70 billion subsidy assisted many agencies in dealing with the losses caused by the pandemic. In March 2020, the government also agreed to compensate workers’ salaries in order to prevent layoffs in affected companies.
So far this year, the government has spent a total of £33 billion to support households in meeting rising energy and gas prices.
The Department of Business, Energy, and Industrial Strategy said, “We know the pressures people are facing with rising costs, which is why we have continually taken action to help households by phasing in £37 billion worth of support.”
“We are giving a £400 discount on energy bills this winter, and eight million of the most vulnerable households will see £1,200 extra support. While no government can control global gas prices, over 22 million households are protected by the price cap, which continues to insulate households from even higher prices.”
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Uncertainty among UK households
Even with the government’s existing interventions, the UK industry continues to sound the alarm. According to Philippe Commaret, an executive at EDF, if the government wishes to prevent fuel poverty in communities, it should provide more assistance to suppliers and households.
Leaders from the UK National Health Service said last week that “[Many people could fall sick this winter as they] face the awful choice between skipping meals to heat their homes and having to live in cold, damp and very unpleasant conditions.”
Russia’s supply cut to Europe has only aggravated the situation. This comes as Western countries restrict Russian oil and coal imports in an initiative to disassociate themselves from Russian resources.
Source: CNN
Opinions expressed by US Insider contributors are their own.
