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Ahead of the Chancellor’s Spring Budget later today, the Government has confirmed the Energy Price Guarantee (EPG) will be kept at £2,500 for an additional three months from April to June, saving a typical household £160. Government support has already cut the typical family energy bill by over £1,300 since October, stopping the average household energy bill from hitting £4,279 a year this winter.
The Chancellor’s three-month extension means households won’t feel the full force of Ofgem’s energy price cap between April and June – which stands at £3,280 – helping to bridge consumers into the summer.
Commenting on the news, Prime Minister Rishi Sunak said: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the Energy Price Guarantee at its current level until the summer when gas prices are expected to fall.
“Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.”
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During the Autumn Statement announced in November 2022, the Chancellor said the EPG was due to rise to £3,000 on April 1, with the Government then expecting to borrow £12billion to fund this support.
Since then, energy prices have fallen by 50 percent, cutting the borrowing needed to fund energy support by two-thirds to £4billion.
The change announced today follows the latest Ofgem price cap of £3,280 from April to June which, in large part, sets the cost for this three-month extension. Households would pay the full Ofgem price cap rate if there was no Energy Price Guarantee.
Holding down energy bills is also part of the Government’s plan to halve inflation this year and in November, the Office for Budget Responsibility said that the EPG would lower the peak rate of inflation.
Lower wholesale gas prices are expected to feed through to lower household energy bills from July, where Cornwall Insight data suggests the Ofgem price cap will reach an estimated £2,100 a year for a typical household.
Jeremy Hunt said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the Energy Price Guarantee at its current level.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
Richard Neudegg, director of regulation at Uswitch.com, commented: “Consumers will be relieved that the Government has acted on the pressure to postpone the planned increase to the Energy Price Guarantee.
“While energy costs are still historically high, wholesale prices are thankfully now turning a corner and we’re getting close to the point when consumers cannot just benefit from the status quo, but actually see lower costs on their bill.”
Mr Neugegg said while the Energy Price Guarantee may only be relevant for another three months, if wholesale prices continue to drop, the next price cap in July could be cheaper.
The Chancellor will be announcing the rest of the Spring Budget to the House of Commons this afternoon.
According to the Treasury, the plans will prioritise easing the impact of rising prices, delivering on the Government’s promise to halve inflation, and growing the economy by supporting more people into work.
This includes distributing hundreds of pounds more to help with childcare costs for parents on Universal Credit. It’s also been floated that the Chancellor may increase the pensions lifetime allowance, encouraging the over 50s – an increasingly economically inactive cohort – to fill out more gaps in the workforce.
The Spring Budget will be aired live on major news channels, including BBC News and Sky News, at 12.30pm. Details of the speech and announcements will also be published on the Treasury’s website.
