New figures warn inflation “could reach 7 percent if energy bills rise to more than £ 2,000 a year ‘

Inflation could climb to its highest level in more than 30 years in 2022 if ministers decided in April not to introduce any control over rising energy bills, new government figures suggest.

Government projections are seen as a warning that a sharp rise in consumer energy costs could cause inflation to rise by another two percentage points to 7 percent in the spring.

Energy regulator Ofgem is revising its current price cap, which will be revised in February after a record six months of skyrocketing wholesale prices.

Experts have warned that energy bills could rise by more than 50 percent, which would mean that the average cost of gas and electricity in households is around £ 2,000 a year.

Ministers were warned that such a sharp increase could lead to an increase in inflation from the current rate of 5.1 percent to more than 7 percent if the rise in Ofgem’s price cap remained unchecked, the Times said.

Financial services company Goldman Sachs provided a similarly incriminating picture, warning that an increase in fuel bills could lead to inflation reaching 6.8 percent in April.

The government's projections are seen as a warning that any sharp rise in consumer energy bills could cause inflation to rise by another two percentage points in April, up to 7%. [File picture]

The government’s projections are seen as a warning that any sharp rise in consumer energy bills could cause inflation to rise by another two percentage points in April, up to 7%. [File picture]

The Bank of England (pictured) has previously warned households to budget more for shopping, bills and family days

The Bank of England (pictured) has previously warned households to budget more for shopping, bills and family days

Earlier this month, the Bank of England said it expected inflation to peak at 6 per cent in April – the highest rate since 1992 – and recommended Families to invest more in their budgets for purchases, bills and days spent outdoors.

Experts have warned that the latest cut could be worse than the credit crunch 14 years ago, thanks to a toxic combination of soaring prices, impending increases in national insurance and more than a million people who have been drawn into higher tax rates.

Conservative MPs are pushing for a panic button over the prospect of a staggering £ 12bn increase in the NI in April, with a tense reaction between Jacob Rees-Mogg and Rishi Sunak in the cabinet this week.

Families face another painful tax increase later this year to raise more money for NHS and social care spending.

National insurance is up 1.25 percent, while freezing income tax bands will mean more people will be drawn into higher rates.

Chancellor Rishi Sunak has previously spoken of a steady rise in interest rates of 1 percent, which will add another £ 25 billion to government debt – which was already around £ 2.2 billion at the end of the financial year in March 2021.

Mr Sunak and Prime Minister Boris Johnson are reportedly preparing to discuss the looming energy crisis over raising the price cap next week.

Business Secretary Kwasi Kwarteng has blocked talks with energy chiefs since last year to browse new measures that could reduce huge increases in consumer bills.

Backbenchers warn chancellor that a 1.25 percent increase in national insurance, which will take effect in April, would exacerbate pressures on family finances

Backbenchers warn chancellor that a 1.25 percent increase in national insurance, which will take effect in April, would exacerbate pressures on family finances

Paul Johnson, director of the Institute for Fiscal Studies, told the Telegraph that people were facing pressure this year that “may be worse than the financial crisis.”

Business Secretary Kwasi Kwarteng (pictured) has been in talks with energy companies since last year to browse new measures that could reduce huge increases in consumer bills.

Business Secretary Kwasi Kwarteng (pictured) has been in talks with energy companies since last year to browse new measures that could reduce huge increases in consumer bills.

Douglas McWilliams of the Center for Economics and Business Research’s think tank advised households to “watch out for inflation in excess of 6 percent.”

He added: “Although wages will rise due to both higher living costs and a tight labor market, at best they are unlikely to do much more than just keep up with inflation.

“So watch out for lower living costs in the UK, especially when price growth exceeds disposable income growth.”

Other experts have previously predicted that household budgets will face at least £ 1,200 in 2022.

To address these concerns, a fund for the entire energy industry has reportedly been designed to allow companies to borrow money to prevent them from going bankrupt and keep costs artificially low.

The overall CPI rate reached 5.1 percent in November, well above analysts’ expectations and the highest in more than a decade.

Other proposals from energy companies include requiring the government to guarantee any loans that would help reduce borrowing costs.

Ministers could also decide to abolish or temporarily suspend green energy charges added to renewables bills or to improve household efficiency across the UK.

Jess Ralston, an analyst at the Energy and Climate Intelligence Unit, told the Times that green levies should not bear the brunt of any government-induced cuts when gas causes a rocket increase in most accounts.

She said: “Those talks about reducing fees ignore the fact that a large part goes to the insulation of low-fuel houses and helps older people to cover winter heating bills.

“Without ten years of these charges, many poorer households would face a much scarier prospect.

“Electricity bills are not growing as fast as gas because timely subsidies for renewables are being paid out and cheaper wind and solar energy are dampening the current high operating costs of gas-fired power plants.”

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