The UK must quickly find a solution to its skyrocketing energy costs or risk a humanitarian crisis. However, the government may have to spend more than £100 billion ($118 billion) to subsidise frozen gas and electricity costs over the next two winters, which is more than it did to pay the salaries of millions of people during the pandemic.

The UK government made an effort earlier this year to shield people from 90% of the anticipated rises in energy costs through tax breaks, energy bill rebates, and direct payments. But since then, both current and projected price increases for natural gas and electricity have skyrocketed.

The government would need to spend an additional £23 billion ($27 billion) in order to shield households from almost 90% of the anticipated increases in energy costs until April 2023, according to researchers at the Institute for Government on Tuesday. The expenditure to offset the same percentage from April 2023 to April 2024 would be an additional £90 billion.


This prediction is in line with the price of a plan put up by Scottish Power, one of the largest energy firms in the UK. According to a Financial Times story, it has urged the UK government to shield millions of homeowners by freezing their bills for two years.

The average yearly bill is already £1,971 ($2,318), up 54% so far this year; but, when the maximum price ceiling is determined for the final three months of this year on Friday, it is anticipated to soar over £3,500 ($4,117). The average home might be paying as much as £6,433 ($7,579) a year for electricity and natural gas by the spring of next year, according to analysts at the research firm Auxilione.

The UK government, according to Scottish Power, should set a limit on energy bills at £2,000 ($2,356) and provide funds to suppliers to help them cover the significantly higher prices of gas and electricity on wholesale markets.

According to the Financial Times, which cited anonymous persons with knowledge of the situation, the subsidy’s $100 billion cost would be covered by increased government borrowing, which would be paid for by general taxation over the course of the next ten years or more.

The price rises, according to Keith Anderson, CEO of Scottish Power, will be “really, absolutely horrible for a big number of people,” he told a Scottish TV station on Monday.
“Greater than the epidemic is this. a significant national crisis, “Added he.
CNN Business contacted the business for comment, but there was no immediate response.

The 18-month-long pandemic furlough programme for the UK government cost close to £70 billion ($82 billion). In order to avoid widespread layoffs in March 2020 when the coronavirus epidemic shut down businesses, the government decided to subsidise employee pay.
According to the Institute for Government’s study released on Tuesday, the government has provided around £33 billion ($39 billion) in support to households so far this year to help with energy expenses through a combination of tax cuts, energy bill rebates, and direct payments. The UK government claims to be taking more action.

A representative for the Department of Business, Energy and Industrial Strategy said, “We recognise the pressures families are feeling with growing expenses, which is why we have consistently taken action to help consumers by phasing in £37 billion worth of support.”
“This winter, we are offering a £400 savings on energy bills, and the eight million households that are the most in need will receive an additional £1,200 in assistance. Over 22 million families are safeguarded by the price cap, which shields them from even higher prices even though no government can control global gas prices “said the spokeswoman.

But the UK energy sector is becoming increasingly uneasy. According to Philippe Commaret, an executive at France’s EDF, a significant player in the UK market, half of UK households could experience fuel poverty at the start of the following year if additional assistance is not provided, which would require them to spend more than 10% of their disposable income on energy.

Many people could become ill this winter as they “face the horrible decision of skipping meals to heat their houses or having to live in cold, damp, and very uncomfortable conditions,” warned leaders of the UK National Health Service last week.

As nations emerged from their pandemic lockdowns last year, demand for natural gas soared globally, driving up wholesale costs.
The late-February invasion of Ukraine by Russia and the ensuing energy shortage have only driven prices higher. Imports of Russian coal and oil have been outlawed by the West, and Europe is desperately attempting to wean itself off of Russian natural gas.

According to data released Wednesday by the Office for National Statistics, June marked the first time in history that the United Kingdom did not import any petroleum from Russia, a country that has historically been one of its biggest suppliers.

Since last summer, 29 smaller energy suppliers in the UK have collapsed due to exorbitant rates. The companies that have persevered have shifted a large portion of the expense to their clients.