Rishi Sunak reveals £150 council tax rebate as energy price cap rises by 54%

Ofgem has set out details of the energy price cap rise, increasing the cost of fuel bills by nearly £700 per year for millions of people.

Roughly 22 million households will be hit by the 54 per cent cap increase. It will bring average annual bills to £1,971 for those on direct debits or £2,017 for people using pre-payment meters – more likely to be low-income households.

Chancellor Rishi Sunak delivered a cost of living support plan to the Commons shortly after the Ofgem announcement, announcing a council tax rebate and £200 loan.

The new cap will come into force in April, when ministers will increase national insurance payments by 1.25 percentage points and, experts say, force people to choose between buying essentials such as food and keeping the lights on at home.

Sunak will offer council tax rebates of an average £150 to England’s households in bands A to D, with larger rebates for the most disadvantaged families. The devolved governments will receive funding to implement the same policy, the chancellor added.

He also announced a £200 loan for all households, which the government will cover upfront before customers repay energy companies in £40 instalments over the next five years. The loan – dubbed a “discount” by Sunak – will be handed out in October, when the energy price cap is scheduled to change again.

Local authorities can use discretionary funding to help low-income households who do not live in council tax bands A-D or those who are exempt from council tax payments, Sunak told MPs.

Speaking in parliament, Labour MP Meg Hillier called him “the Klarna chancellor” in response to plans to give households repayable loans.

The price cap means soaring wholesale energy prices which could not be passed onto customers. At least 25 UK suppliers have folded while Bulb remains in a state of de facto nationalisation.

“The skyrocketing price of gas will now push people into precarious financial positions, and spells disaster for those already struggling to meet the rising cost of heating their home,” said Connor Schwartz, climate lead at Friends of the Earth. “The government must announce sufficient support for anyone already finding it hard, or who are at imminent risk, from these hikes.

“This is on the same day that Shell’s highest quarterly profits in eight years is announced. Fossil fuel companies are raking it in while people are choosing between food and heating, so the question again has to be asked: why isn’t there a windfall tax on these companies?

“We need to address the root cause and that means ending the cause of the crisis: reliance on gas. Make no mistake, this will be a year-on-year problem unless the government is radical now. The best time to invest in renewables and roll out a huge home insulation programme was 20 years ago, the government didn’t do it then, the next best time is right now.”

The 54 per cent rise in the energy price cap far exceeds the last change, made in October last year, which increased it by 12 per cent. Inflation hit a 30-year high in December.

“Cost of living pressures are at boiling point,” said Clare Moriarty, chief executive of Citizens Advice. “April’s price hikes haven’t yet hit and already people are turning to our services in record numbers.

“Frontline advisers are hearing desperate stories of families living in just one room to keep warm, people turning off their fridges to save money and others relying on hot water bottles instead of heating due to fears about mounting bills.”

Joe Malinowski, founder of energy price comparison website The Energy Shop, said the energy price cap has “already bankrupted over half of all energy suppliers in the market”.

“Now it is set to bankrupt the consumer,” he added. “Come April 1, energy households up and down the country are set to get battered by colossal increases in energy bills. For many, if not most, it will be simply unaffordable.”