Energy bills for millions of households are set to rise sharply again this summer, despite recent government reassurances and a temporary cut that took effect just weeks ago. This looming increase, forecast for July, threatens to completely overshadow the modest reduction ministers have been keen to promote, laying bare the enduring pressure on Britain’s cost of living from the ongoing conflict in the Middle East.
The Numbers Behind the Squeeze
In April, a £117 annual reduction in the energy price cap came into force, a policy paid for by shifting the cost of green schemes to general taxation. However, the latest forecast from consultancy Cornwall Insight estimates that the cost of a typical dual-fuel bill will surge by 17.6% from July. This projected rise would effectively swamp the 7% cut delivered in the spring. Further modelling from the Resolution Foundation suggests prolonged high gas prices could add around £500 to the annual cap.
The root cause is a global supply shock. Since the onset of hostilities involving Iran, the vital Strait of Hormuz has become a no-go zone for tankers, severely disrupting global energy flows. QatarEnergy has halted its liquefied natural gas (LNG) production, and analysts like Andrew Sissons, director of the climate programme at Nesta, estimate the global supply of oil and gas could be down by around 20%. Consequently, wholesale gas prices have skyrocketed, with day-ahead power prices up 30%.
A “Keep Calm” Message Under Strain
In response, Labour ministers have adopted a steadfastly reassuring tone. Chief Secretary to the Treasury James Murray urged the public to “go about their lives as normal,” a sentiment echoing the wartime “keep calm and carry on” slogan. The government is determined to prevent panic buying and avoid talking down the fragile economy.
Yet this communication strategy is facing mounting criticism for potentially underplaying the scale of the challenge. “It’s the wrong message,” argues Andrew Sissons. “It’s a supply crisis, which means everybody needs to consume less.” The fear is that a “business as usual” narrative crowds out sensible advice on reducing consumption and appears increasingly adrift from the economic reality facing consumers and businesses.
That reality is one of broadening inflationary pressure. Surging oil and petrol prices are expected to feed through to a wide range of products. The Food and Drink Federation has nearly tripled its forecast, warning UK food inflation could reach 9% this year due to rising energy, transport, and packaging costs. The Road Haulage Association reports that soaring fuel costs are straining operators, forcing some to introduce surcharges.
Fiscal Tightropes and Policy Responses
The crisis also complicates the government’s fiscal landscape. While VAT receipts on fuel will rise with prices, wider tax revenues are threatened by an expected economic slowdown, and the government’s own borrowing costs have increased. This jeopardises Chancellor Rachel Reeves’s fiscal targets and informs her insistence that any further help with bills must be “targeted” – a view shared by think tanks like the Institute for Fiscal Studies.
This marks a shift from the universal support offered during the Ukraine crisis. The government is now considering channelling support through local councils to families hardest hit. Simultaneously, it faces political heat over its plan to gradually reverse the previous administration’s 5p cut to fuel duty in three steps between September and March next year.
Longer-term policies continue apace, emphasising a transition to cleaner, homegrown power. The Warm Homes Plan aims to upgrade millions of homes for efficiency, new building regulations will mandate heat pumps and solar panels on new homes in England, and a new “North Sea Future Plan” aims to support investment in offshore wind and carbon capture alongside oil and gas. Labour also plans to increase and tighten the windfall tax on oil and gas companies. From 2028, an “Electric Vehicle Excise Duty” is planned to compensate for lost fuel duty.
The Expert Advice Being Sidelined
Experts argue that the government’s messaging misses a crucial opportunity to guide public behaviour constructively. Jill Rutter of the Institute for Government, a former Treasury senior civil servant, suggests a more useful mantra would be: “keep calm, but you can probably find some quite useful savings.”
Andrew Sissons advocates for a clearer twofold message: “number one, be more efficient wherever you can… and number two, this is a great time to be switching away from oil and gas on to clean electricity.” Practical steps recommended by bodies like Ofgem include draught-proofing homes, reducing shower time, switching appliances off standby, and using efficient washing machine settings.
While the UK’s immediate gas supply is considered secure due to diverse sources including North Sea production and Norwegian pipelines, the crisis underscores the fundamental vulnerability of relying on volatile global fossil fuel markets. As the conflict continues, the gap between ministerial calm and the forecast for household budgets appears set to widen, leaving families to navigate the rising costs with limited official guidance on how to adapt.
