Reeves Defers Energy Intervention as Price Cap Hike Looms

Ministers in Great Britain are facing intensifying scrutiny over their handling of the energy market as forecasts indicate typical dual-fuel bills will rise by £209, or nearly 13 per cent, from this summer. The increase, driven by a doubling of UK gas market prices following the Iran war, is projected to push annual household costs to almost £1,900. Despite the scale of the anticipated rise, Chancellor Rachel Reeves has not committed to direct energy bill relief, instead announcing contingency plans described as "targeted and temporary" support.

The Treasury has opted for alternative measures to coincide with the start of the summer holiday season, introducing what it terms "Great British summer savings." These include VAT reductions on tickets for attractions and children’s meals. A government spokesperson emphasised that tackling the affordability crisis remains the administration’s "number one priority," while noting that the conflict in the Middle East has underscored the need to transition away from fossil fuels towards clean, homegrown power.

Market experts at Cornwall Insight have warned that the quarterly price cap is likely to remain above pre-crisis levels into early winter, even if geopolitical tensions ease. Craig Lowrey, principal consultant at the consultancy, stated that unless the cap drops in the autumn, the government "will need to think seriously about targeted support for the most vulnerable." The unit price of electricity is expected to rise to 26.03p per kilowatt hour from July, while gas will increase to 7.16p/kWh.

Campaigners have expressed disappointment at the government’s hesitation. Simon Francis of the Fuel Poverty Action Campaign argued that the delay in announcing support could exacerbate anxiety among households, particularly those on direct debit who may see energy firms increase payments immediately to account for likely higher costs this winter. Francis noted that campaigners had hoped the predictions of a significant price cap rise would prompt ministers to act more decisively.

The Treasury maintains that it is premature to implement specific energy relief measures, citing the need for clarity on a potential peace deal between the US and Iran regarding the Strait of Hormuz. Meanwhile, the regulator Ofgem is expected to announce the new price cap on Thursday. The regulator is considering lowering its assumptions for average home energy usage, which may result in the new cap appearing similar to the current level despite the higher unit rates.