Thank you for contacting me about energy bills and the cost of living.
Several external factors have driven inflationary pressures. In particular, shortages created by the reanimation of the global economy and global energy price spikes brought on by the inability of supply to keep up with demand and the Russian invasion of Ukraine. This has been particularly acute when it comes to the price of wholesale gas.
In recognition of the unprecedented circumstances pushing up fuel prices, I welcome the decision announced in the Spring Statement to cut fuel duty by 5 pence for a full year across all fuel duty rates. The decision to freeze fuel duty for the twelve consecutive years prior to this cut had already saved the average driver over £1,900 compared to the pre-2010 escalator.
Global gas prices are high due to various factors, including an increase in demand following the end of lockdowns in various countries and in return economies reopening, a cold winter in the UK, high demand in Asia for liquified natural gas (LNG) transported globally by freight which has meant that far less LNG has reached Europe, and weather events in the US limiting supply to Europe. With reduced variety of supply globally and much higher than anticipated demand, high wholesale gas prices have subsequently driven an increase in wholesale power prices, with a number of short-term markets trading at, or near, record levels.
I want the UK to be less reliant on energy sources from overseas. I believe it is important for the Island to be able to attract green Tidal energy projects. I have spoken to Ministers about this on several occasions.
Since Ofgem’s confirmation of the price cap rise, which is now in effect, the Government has put forward an ambitious support package to help both lower and middle-income earners with the immediate adjustment. This includes a £400 grant for energy bills for all which the Chancellor has not only recently doubled, but he has also cancelled the clawback mechanism meaning this will not have to be repaid. Further, a non-repayable £150 cash rebate is being provided for homes in Council Tax bands A-D, equivalent to 80 per cent of all households and £144 million of discretionary funding for local authorities to support those not eligible for the council tax rebate. This means that hard working families will receive £550 with lower income families receiving even more help.
Any decision to further modify our tax regime in relation to domestic heating and other fuel is a matter for the Treasury and careful consideration will be given to any proposed amendments to current VAT rates. The Government keeps all taxes under review, including VAT. I shall be following the developments on this issue closely, and I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue.
Thank you again for taking the time to contact me.