An energy price cut to make April Fools of us all
The energy price cap is falling 6.6% on 1 April, just as we all stare into the gaping maw of a new energy crisis, Edmund Greaves writes.
It is something of a bitter irony that the energy price cap is falling on April Fool’s Day of all days this year.
We’re going to get a raft of headlines reminding us all that our energy bills are getting a nice healthy trim, thanks to the energy regulator Ofgem’s price cap.
But more than that, we’re getting a nice extra bump because the Government has ‘cut bills’ (what it has actually done is shift a cost onto general taxation) for households.
It all feels like a bit of a bad joke, though.
I listened to streams of callers on BBC Radio Devon this morning lament just how hard their pockets have been hit by soaring petrol prices. My wife went to fill up our petrol-draining SUV this morning and found the station had run out of diesel.
My family is lucky in that I work from home and my wife (who drives a lot for work) is currently on maternity leave. Others will be getting hammered though.
Colleagues such as Paul Thomas make the credible point that raising interest rates into such an environment might realistically be called an act of insanity – were it to happen.
The energy price cap shields households from the increases – but only for so long. It will come back with a vengeance given time.
Energy market intelligence firm Cornwall Insight today published its prediction for the July price cap decision. It’s really, really bad. The firm says it thinks the price cap will increase an eye-watering 18% – a £288 increase on average annual bills.
And if it is anything like 2022, we might get some company wipe outs along the way.
In 2022 a wave of companies hit the bricks because of the price cap. Prices for energy skyrocketed, but because of the cap, those firms couldn’t adjust prices to pay their own bills. Many got caught in the middle and we ended up with a less competitive sector.
Households were spared the worst of the energy crisis price hikes but arguably the effect of lumping a massive amount of extra debt on the public purse was a more pernicious decision for the long term.
I have never been a fan of the price cap. It is, like so many Government policies, an attempt to stifle price signals which only makes our economy less fair and less efficient. Better to target support at the households most vulnerable and let the rest of us face the reality of the system. Our choices are reflected in our outcomes.
I think the Government’s choice to stay taciturn this time round is better – but whether that will survive the May local elections which are starting to already look like a massacre for Labour remains to be seen.
What’s coming up in April
Alongside April Fool’s Day on 1 April, this year the National Living Wage and National Minimum Wage annual increase takes effect, by 4.1% (for those aged 21+ yrs), 8.5% (18-20 yrs).
As mentioned, the Ofgem energy price cap update comes into effect on 1 April too, with a 6.6% decrease.
On 6 April we get the start of the new tax year. The two child limit in Universal Credit is set to be removed, too.
Financial firms will be allowed to provide targeted support from the same date.
The latest Office for National Statistics (ONS) monthly GDP estimates fall on 16 April while ONS UK monthly earnings and Employment Statistics fall on 21 April.
This is followed on 22 April by the ONS UK monthly inflation figures and ONS UK monthly retail sales figures on 24 April.
On 28 April new debanking rules come into force. The new rules require banks to give customers 90 days’ notice before closing an account or terminating a payment service, an increase from the current two months.
Finally rate decisions are inbound at the end of the month, with the Federal Reserve Board U.S. interest rate decision on 29 April and Bank of England (BoE) UK interest rate decision on 30 April.