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Energy Crisis in the UK Pressures Government to Increase Financial Aid to Households, Suppliers

Photo Credit: Rupert Hartley/Bloomberg

If the UK does not resolve its worsening energy shortage soon, it may face a humanitarian crisis. The rise in demand, combined with a scarcity of supply, has resulted in higher bills, and if this trend continues, experts believe that many consumers will protest.

The country intends to freeze electricity and gas prices to cheer up consumers; however, this could cost the government more than £100 billion, or more than $118 billion.

To protect the populace from 90% of the anticipated rise in energy prices among providers, the UK government has implemented tax cuts, direct payments, and bill rebates. But as expected, gas and energy prices have reached record highs, and it’s possible that the government won’t be able to keep up.

The Institute of Government experts estimates that the government may need to allocate an additional £23 billion to shield its citizens from a 90% increase in costs until April 2023. To extend that protection through April 2024, a larger sum of £90 billion is required.

The same suggestion was made to the government by Scottish Power, one of the biggest energy companies in the UK. According to the Financial Times, the company stated in one of its interviews that the government must freeze prices within two years in order to serve the public. It would, however, cost them billions of euros.

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The increase in bills paid by households

A household spends over £1,971 annually, a 50% increase from the previous year. The average annual cost, according to energy companies, could be £3,500. Since the current trend indicates that a household could pay as much as £6,433 annually, according to research firm Auxilione, it is crucial for the government to take action.

In order to help suppliers catch up with the cost of gas and electricity in wholesale markets, Scottish Power proposed capping energy bills at £2,000. According to the Financial Times, the estimated £100 billion allocation for subsidies to energy providers would come from government borrowing that general taxes would pay off.

Keith Anderson, the CEO of Scottish Power, said, “It is going to be truly, truly horrific for a large number of people. This is bigger than the pandemic. It’s a big national crisis.”


The government’s help is needed

In the UK, government funding for assistance to those in need is nothing new. Numerous organizations were able to deal with the losses they suffered when the pandemic struck, thanks to the £70 billion government subsidy. In March 2020, the government also consented to pay employees’ wages in order to reduce unemployment among the affected businesses.

The government has allotted a total of £33 billion so far this year to assist households in coping with the rising cost of energy and gas.

According to a spokesperson from the Department of Business, Energy, and Industrial Strategy, “We know the pressures people are facing with rising costs, which is why we have continually taken action to help households by phasing in £37 billion worth of support.”

“We are giving a £400 discount on energy bills this winter, and eight million of the most vulnerable households will see £1,200 extra support. While no government can control global gas prices, over 22 million households are protected by the price cap, which continues to insulate households from even higher prices.”

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Looming concern among households

The UK industry is still sounding its alarms despite the ongoing government initiatives. The government should give suppliers and households more support if it wants to stop fuel poverty in communities, according to Philippe Commaret, an executive at EDF.

“[Many people could fall sick this winter as they] face the awful choice between skipping meals to heat their homes and having to live in cold, damp and very unpleasant conditions,” said the heads of the UK National Health Service last week.

Russian supply disruptions to Europe have only made matters worse. In an effort to wean themselves off their reliance on Russian resources, Western nations have banned the import of Russian coal and oil.

Source: CNN