Everyone Should Reduce Energy Consumption Amid Crisis, UK Chancellor Says

Chancellor of the Exchequer Jeremy Hunt, leaves Downing Street following the first Cabinet meeting with Rishi Sunak as prime minister, in London on Oct. 26, 2022. Victoria Jones/PA

UK Chancellor Jeremy Hunt has urged people to reduce their energy consumption so that Britain is not susceptible to disruptions in international energy supplies.

Talking to the Treasury Committee of the House of Commons on Nov. 23, Hunt warned that people will “have to take responsibility for their energy bills” and reduce their usage or there will be a “huge additional burden on taxpayers.”

The government is set to spend billions of pounds on its energy support scheme, which shields households and businesses from sky-high energy prices by capping the average costs.

Hunt told the committee: “What we can do is say we’re going to help you this year with the £2,500 ($2,960) cap, we’re going to help you next year with the £3,500 ($3,500) cap, we’re going to help you conserve the energy you use and for the poorest people we’ll try and find a more effective structure.

“But we are saying to people that in the end everyone is going to have to take responsibility for their energy bills and they’re going to have to think about how they’re going to reduce their energy consumption.

“Because it is a national mission to make sure that we can’t be blackmailed by people like [Russian President Vladimir] Putin when they do things that interrupt international energy supplies.”

Energy Support

The average annual household energy has been frozen at £2,500 from Oct. 1 under the energy price guarantee introduced by former Prime Minister Liz Truss.

The cap, limiting the price companies can charge customers per unit of energy they use, was to have lasted for two years from Oct. 1. But after Hunt replaced Kwasi Kwarteng as chancellor, he announced that it would end at its current level after six months, after which more targeted help would be provided to the most vulnerable.

In his autumn budget, unveiled on Nov. 17, he announced that the energy price guarantee will continue for a further 12 months from April, but will rise from the current £2,500 to £3,000 per year for the average household.

Hunt told MPs that the scheme will cost £80 billion ($97 billion) this year and “possibly around half that next year.”

“In the long run we’re going need everyone to help us crack this problem if we’re not going to have a huge additional burden on taxpayers which ultimately will lead to the kind of high taxes I certainly don’t believe are desirable in the long run,” he said.

“So we’re trying to help people to help themselves. We’re giving them a cushion this year and next. But we do need people to change their behaviour.”

He added: “We will always be there to help poorer households, the way we do that will change. But for most people we need you to play your part in reducing our energy dependency on what Putin chooses to do in Ukraine, that’s why we’ve got this national ambition to reduce energy consumption by 15 percent.”

Government Borrowing

According to the Office for National Statistics (ONS) on Nov. 22, the UK’s government borrowing rose to £13.5 billion ($16 billion) in October.

The figure was £4.4 billion ($5.2 billion) higher than the same month last year and was the fourth-highest figure for October since monthly records began in 1993, the ONS said.

The higher borrowing figure was in part caused by the energy support schemes, which pushed the central government’s current spending to £76.8 billion ($91 billion), £6.5 billion ($7.7 billion) more than the same month last year.

Central government tax receipts for October were £51.7 billion ($61.3 billion), £2.5 billion ($2.96 billion) more than a year ago.

The government also felt the impact of continued increases in the interest payments paid by the state on its debt, after a raft of interest hikes by the Bank of England and rises in inflation.

In October, the interest payable on central government debt hit £6.1 billion ($7.2 billion), including £3.3 billion ($3.9 billion) from debt interest payments.

‘Untargeted’ Support

According to the latest forecasts from the Organisation for Economic Cooperation and Development (OECD), the UK economy will contract more than any other G-7 nation next year.

The OECD expects the UK economy to shrink by 0.4 percent in 2023 and grow by just 0.2 percent in 2024.

The UK is also the third-worst performing nation of all the G-20 countries worldwide, with only Russia and Sweden seeing a bigger decline in GDP, at 5.6 percent and 0.6 percent.

The OECD blamed the predicted downturn partly on the UK government’s energy support scheme, saying it will push up inflation, forcing policymakers to raise interest rates further as they try to rein in price and wage rises.

On Britain’s outlook, the OECD cautioned: “Risks to the outlook are considerable and tilted towards the downside. Higher-than-expected goods and energy prices could weigh on consumption and further depress growth.

“A prolonged period of acute labour shortages could force firms into a more permanent reduction in their operating capacity or push up wage inflation further.”

PA Media contributed to this report.