Andy Burnham kicked off his time at No 10 by promising to tackle the cost-of-living crisis, especially soaring energy bills. He quickly scrapped the 5% VAT charge on electricity, albeit for just six months. He also pledged to cap bus fares and hinted at lifting the tax-free personal allowance, until somebody pointed out how much that would cost. Burnham knows the cost-of-living crisis could wreck his early popularity. But his options are limited. And another threat now looms just as the weather turns colder.
Today, Ofgem’s energy price cap stands at £1,663 a year. Consultancy Cornwall Insight forecasts that it could climb to around £1,740 from October, then rise as high as £1,911 from January. That would add almost £250 to the average annual bill, dwarfing the estimated £45 saving from lifting VAT. It could get worse. As Donald Trump’s war with Iran drags on, energy supplies are once again in a stranglehold. Last week, the oil price jumped to $100 a barrel before easing to around $83. That’s still well up on the $72 seen at the start of July, piling pressure on motorists. The bigger worry is gas.
Analysts at Wood Mackenzie warn that the threat to Qatari gas supplies risks pushing Europe into “energy crisis territory”, with storage sites only 50% full today. At best, Europe could get that up to 75% by winter. Normally, they’re at 90%. The result could be a global scramble for gas at peak winter prices.
Britain is even more exposed because we’ve allowed our gas storage capacity to wither. France has enough storage for more than 100 days of demand. Germany has around 90 days. Britain has just three or four. Instead of buying cheap gas during the summer, we’re forced to buy at whatever the market happens to be charging, known as the spot price. This winter, it could be brutal.
Incredibly, Britain is in the process of shutting the Rough gas storage facility. The depleted North Sea gas field was once Britain’s largest gas store before its owner, Centrica, shut it in 2017 after the Conservative Government declined to help fund the estimated £2 billion repair bill.
Rough partially reopened as an emergency measure during the 2022 energy crisis, but has never returned to full use. Talks between Centrica and Miliband went nowhere. The company is now threatening to shutter Rough altogether from next April and isn’t refilling it for this winter.
Rough may not be the only answer. But the new energy secretary, Miatta Fahnbulleh, needs to find one quickly. UK gas use is gradually falling as renewables expand, yet it still supplies over a third of Britain’s energy.
If gas prices spike again this winter, millions of households will feel the cold. But Downing Street may find the political temperature falls even faster. By then, Andy Burnham’s summer political honeymoon will be a fading memory.
