The Government will have to pay nearly 21pc more towards the average household energy bill from the start of next year after regulators lifted the energy price cap.
The move does not affect household energy bills, which have been limited to an average of £2,500 from the Government’s energy price guarantee.
However, the increase in the price cap set by Ofgem has increased the cost to the Government, as this would have been the ceiling at which energy companies could charge households for their services.
Today, Ofgem raised the price cap from £3,549 to £4,279 from January, which leaves the Chancellor needing to pay an extra £730 on average per household to cover the cost of supplying gas and electricity to Britain’s homes.
It means the Treasury would need to fork out another £1,779 on average per home for the year to pay for the energy costs of Britain’s nearly 28m households.
The increase will cost taxpayers £42bn over 18 months, according to analysts Cornwall Insight.
Experts at energy consultancy Auxilione estimate the new cap will cost the Government around £15.1bn to subsidise household bills between January and March.
However, the Government has limited its bill should the cap rise again in Ofgem’s next announcement in February.
Jeremy Hunt announced in his Autumn Statement that the energy price guarantee will rise from £2,500 to an average £3,000 a year from April 1 until the end of March 2024.
5 things to start your day
1) Households must slash energy use to defeat Putin, says Hunt – Britain must cut energy usage by 15pc to defeat Vladimir Putin, Jeremy Hunt has said as the country scrambles to head off potential disruption this winter.
2) Sunak abandons plans to overrule City regulators after Bank of England backlash – Rishi Sunak has abandoned plans to give ministers the power to overrule City regulators in a major climbdown by the Prime Minister.
3) As Silicon Valley swings the axe, Ireland counts the cost of its tech addiction – When Google’s executives landed at Dublin Airport two decades ago on a scouting trip for a potential European head office, they were ferried by Irish government officials to the city’s down-at-heel docklands.
4) Middle-class outcry over wholemeal flour in ‘white’ sourdough – Ocado shoppers are up in arms after an upmarket sourdough overhauled white loaf recipe to include wholemeal flour, prompting the bakery behind it to deny cost cutting prompted by the war in Ukraine.
5) Rishi Sunak faces backbench rebellion over wind turbines amid energy crisis – Rishi Sunak is facing a rebellion from his MPs over onshore wind amid efforts to beat the energy crisis. Simon Clarke, the MP for Middlesbrough South and East Cleveland, has tabled a legislative amendment aimed at relaxing planning rules so turbines can get built more easily if communities want them.
What happened overnight
In the US, minutes from the Federal Reserve meeting at which officials raised rates by 0.75 percentage points for the fourth consecutive time suggested support for a slower pace of rate rises.
Central bank officials are seeking to stamp out inflation around the world.
Shares in the US closed higher as a result, with The S&P 500 up 0.6pc, while the Dow Jones Industrial Average gained 0.3pc. The Nasdaq composite closed 1pc higher.
Bond yields declined. The yield on the 10-year benchmark US government debt, which influences mortgage rates, slipped to 3.69pc from 3.76pc.
Crude prices fell 3.7pc, which depressed energy stocks. US homebuilders rallied after a report showed that the housing market was healthier than previously thought.
Meanwhile, Asian shares were up on Thursday, buoyed by signals the US Federal Reserve may slow the pace of interest rate hikes and news of fresh economic stimulus from China.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.8pc in early trade, boosted by a 0.6pc gain in South Korean shares, a 0.5pc increase in China’s bluechips and a 0.9pc jump in Hong Kong’s Hang Seng index
Japan’s Nikkei rose 1.3pc, S&P 500 futures gained 0.2pc and Nasdaq futures inched up 0.3pc.