Energy bills set to rise 35 times faster than wages by the end of the year

·Political Correspondent, Yahoo News UK
·4-min read
A general view of a household energy bill displayed on a mobile phone held next to a gas hob. Families across Great Britain will find out on Friday how tough energy bills will be this winter but they may have to wait to discover what the Government will do to help Picture date: Thursday August 25, 2022. (Photo by Yui Mok/PA Images via Getty Images)
Ofgem announced its energy price cap will be £3,549 from 1 October. (Getty Images)

Energy bills are set to rise 35 times faster than wages in the final quarter of 2022 amid the worsening cost-of-living crisis, according to analysis by the Trade Union Congress (TUC).

On Friday Ofgem announced the energy price cap will increase by 80%, meaning the average household's annual bill will rise from £1,971 to £3,549 from 1 October.

It comes after inflation hit 10.1%, a 40-year high, in August with experts warning of a winter crisis without an urgent financial intervention from the government.

According to the TUC, average pay is set to increase by £1,470 per year between October 2021 and October 2022.

Meanwhile over the same period energy bills will increase by £2,270 per year – resulting in a loss of £800 for the average worker.

Percentage change in wages, energy price cap and benefits payments between October 2021 and October 2022. (ONS, Ofgem, DWP, TUC analysis)
Percentage change in wages, energy price cap and benefits payments between October 2021 and October 2022. (ONS, Ofgem, DWP, TUC analysis)

TUC general secretary Frances O’Grady said: “Nobody should have to worry about heating their homes this winter.

“But millions are facing bankrupting bills in the months ahead.

“Today’s energy price rise will be hammer blow to family budgets and tip many households into fuel poverty.

“Ministers must immediately cancel this catastrophic increase. This is the worst possible time for the government to go missing in action.

“And to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership.”

Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)
Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)

Ofgem's CEO, Jonathan Brearley, said the government would need to expand on support it announced in May when bills were expected to jump to £2,800.

“The response will need to match the scale of the crisis we have before us," said Brearley.

Read more: The 80 areas where people will spend more than a fifth of take home pay on energy bills

"With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”

Elsewhere, charities have called on the government to urgently announce new financial support for households struggling with price shocks.

Read more: UK inflation: Food and energy bills to cost more than 50% of your pay

"Today’s Ofgem price hike is like a dagger to the heart of millions of people up and down the country," said Simon Francis, co-ordinator of the End Fuel Poverty Coalition.

“As a result of the decision, parents will be unable to feed their children, the sick and elderly will be condemned to worsening health, disabled people will go without vital medical equipment and households will be forced into poverty for the first time in generations.

“All the solutions lie at the Westminster government’s door, yet it is silent in the face of this looming disaster.”

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UK inflation is at its highest level for decades. (ONS CPI)

National Energy Action (NEA) has warned 8.9 million UK households will be in fuel poverty from October without more support.

In the aftermath of Ofgem's announcement, Chancellor Nadhim Zahawi has said he is aware that the announcement will be causing "stress and anxiety for many people".

"While Putin is driving up energy prices in revenge for our support of Ukraine’s brave struggle for freedom, I am working flat out to develop options for further support," said Zahawi.

Read more: UK workers see record drop in pay amid rising bills

"This will mean the incoming prime minister can hit the ground running and deliver support to those who need it most, as soon as possible.”

It comes as Tory leadership hopefuls Liz Truss and Rishi Sunak enter the final stretch of their battle for Number 10, with the victor announced on 5 September.

Read more: Price cap: UK households face £700 a month energy bills from January

Both candidates have said tackling the cost-of-living crisis is a priority - with the foreign secretary proposing tax cuts, and the former chancellor proposing limited targeted financial support.

However, experts have warned the pair their proposals are nowhere near ambitious enough to tackle the incoming toxic combination of soaring energy bills and spiralling inflation this winter.

It comes as energy consultancy Cornwall Insight forecast energy prices will continue to rise in 2023, hitting £5,386 in January and £6,616 in April.

Watch: Energy bills to soar for millions as price cap hiked to £3,549