An increase in the energy price ceiling may cause inflation to rise to 7% and exacerbate the cost of living crisis

Inflation could rise to around seven percent if the energy price ceiling shoots up in April as expected, according to reports.

The energy regulator Ofgem is currently reviewing regulated price ceiling, which manages most retail energy bills and protects 15 million customers.

Due to sky-high wholesale gas prices, the ceiling is expected to rise by about 50 per cent – which would push average household spending on gas and electricity from £ 1,277 a year to as much as £ 2,000 from April.

Internal government estimates suggest that such an increase could cause inflation to rise by 2 percent from the level of 5.1 per November, according to The times, which would exacerbate the cost-of-living crisis and put pressure on public finances.

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A projection from financial firm Goldman Sachs also suggests that rising fuel bills could help push inflation to 6.8 percent, the highest level in 30 years, the newspaper reports.

Boris Johnson and Chancellor Rishi Sunak are due to discuss the energy crisis early next week as concerns grow about the impact of rising house prices on households.

Charities, including Fuel Poverty Charity National Energy Action, have warned that the sharp rise in costs will lead to “an avalanche” of people falling into debt or rationing for heating.

Martin Lewis from Money saving expert is among those who have called for “significant intervention“From the government, which warns:” This year will be a very hard year for many people. “

Days of talks between Business Minister Kwasi Kwarteng and energy companies have been held to discuss possible measures to ease the impact on consumers.

Some companies have called on Whitehall to set up a “stabilization fund” to help them offset price increases over a five-year period.

However, British Gas owners have rejected the idea of ​​a rescue package from taxpayers.

Entering The sun, Chris O’Shea, CEO of Centrica, which owns British Gas, suggested that the government could reduce costs for consumers by other means, such as scrapping environmental taxes or suspending VAT on energy bills.

He wrote: “We have not asked for a rescue package, we do not want a rescue package and we are against any rescue operation.

“Our advice to the government is to try to help those customers who are already struggling to make ends meet, not to worry about helping the energy companies’ balances.”

A total of 27 energy companies have collapsed since 2021 due to soaring wholesale gas prices.

Ofgem is to announce the level of the increased price ceiling – which will be in place between April and September – around 7 February.

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