Britons to face highest price cap in three years as energy bills rise 4% from October

Developing story first seen 3 hours ago

The Guardian · 3 hours ago

Ofgem has confirmed that the energy price cap for Great Britain will rise by 4% from October, marking the highest level in three years and the second increase in three months after prices climbed 13% in July. The rise, driven by soaring global market prices linked to the war on Iran, has intensified pressure on struggling households and prompted fresh calls from unions and campaigners for the government to fund extra support by taxing energy firms' and banks' profits.

Under the new cap, a typical household will pay the equivalent of £1,723 a year, up from £1,663 for July to September and £350 more than in 2024, when Labour promised to cut bills by £300 by the end of the decade. Energy secretary Miatta Fahnbulleh pointed to the removal of VAT from electricity bills and £150 taken off bills in April's budget as mitigating steps, while TUC general secretary Paul Nowak urged a windfall tax on banks. Research for the End Fuel Poverty Coalition found more than a third of households are turning down heating or appliance use, with about a fifth going to bed early or heating only one room to save money; the Conservatives have separately blamed network upgrade costs from the government's clean power plan for high electricity prices.

Energy price cap rises 4% from October to £1,723 a year, a three-year high.
Unions and campaigners demand windfall taxes on banks and energy firms.
Fuel poverty research shows households cutting heating and meals to save money.

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Households across Great Britain buy their gas and electricity from private suppliers, but the total amount those suppliers can charge is limited by a "price cap" set by Ofgem, the industry regulator, and updated every three months. This cap does not fix a total bill, since it depends on how much energy a household actually uses, but it does set the rate for a typical user, and it moves largely in line with wholesale prices that the UK pays for gas and electricity on international markets.

The cap has been rising because global energy prices have gone up, partly linked to instability following the war involving Iran. This matters because household budgets in Britain are already stretched, and higher bills affect low income and vulnerable households most, prompting warnings from anti-poverty groups and campaigners about people cutting back on heating and other essentials.

The issue is also politically sensitive because the Labour government, including energy secretary Miatta Fahnbulleh, had pledged to bring bills down as part of its wider energy policy, while opposition politicians and trade unions have different views on the causes and the right response, including debate over further taxes on energy company and bank profits.

Both sides, in good faith

The strongest fair case each way — we don't pick a winner.

The case for

Advocates for further government intervention argue that with a typical bill now £350 higher than in 2024 and independent research showing households skipping meals, cutting heating and going to bed early to save money, the human cost of rising prices is severe and demands more than incremental relief. They contend that when energy firms and banks are recording strong profits amid a cost-of-living crisis, a windfall tax is a fair and proportionate way to fund additional support, reflecting a broader belief that markets should not be allowed to leave the most vulnerable exposed to volatility caused by events, such as international conflict, entirely beyond their control.

The case against

Those cautious about further intervention argue that the price cap rise stems largely from volatile global gas markets and geopolitical shocks that no domestic policy can fully offset, and that the government has already acted through VAT removal on electricity and direct bill reductions in the budget. They warn that repeated windfall taxes risk deterring the investment needed in energy infrastructure and the clean power transition, potentially raising costs further in the long run, and argue it is reasonable to weigh short-term relief against the fiscal and investment consequences of taxing companies whose stability underpins future energy security.

Full account

Households across Great Britain are braced for the steepest energy price cap in three years after regulator Ofgem confirmed a further 4% increase from October, pushing the typical annual dual-fuel bill to £1,723. The rise, equivalent to roughly £60 a year or £5 a month, comes only three months after the cap jumped by 13% in July, with both increases attributed largely to volatile wholesale gas prices stemming from the ongoing conflict in the Middle East involving Iran. Around 22 million households on standard variable tariffs will be affected, though roughly a third of customers on fixed-rate deals will be shielded from the change. Ofgem and independent analysts stressed that the underlying cause lies in international energy markets rather than domestic policy, with reports noting that European heatwaves have added to gas demand for power generation and cooling, compounding pressure from the war's disruption to supply.

The headline figure reflects a change Ofgem made earlier this year to how it calculates a 'typical' household's consumption, lowering its assumptions to reflect the fact that high prices have already pushed many families to cut their usage. Had the regulator retained its previous methodology, commentators noted the cap would have risen to roughly £1,940 rather than £1,723, making the like-for-like increase look considerably steeper than the headline percentage suggests. From October, unit rates for electricity will rise modestly from 26.11p to 26.32p per kilowatt hour, while gas charges climb more sharply from 7.33p to 7.97p — with analysts pointing out that gas costs for price-cap customers are running nearly 27% higher than the same point last year. Forecasters at Cornwall Insight, whose pre-announcement estimate of around £1,729 proved close to the final figure, warned that this rise will not be the last: they are predicting a further increase of roughly 9%, or about £149, when the cap is next reset in January, which would take typical bills to around £1,872.

The announcement has drawn a swift political and consumer response. Energy Secretary Miatta Fahnbulleh acknowledged public frustration, telling Reddit users that the government understood people were 'worried and frustrated' and pointing to measures already taken, including the removal of VAT from electricity bills and £150 cut from energy costs in April's budget. Consumer and campaign groups were less forgiving: Citizens Advice chief executive Clare Moriarty described the rise as further evidence of a 'relentless erosion of living standards', while TUC general secretary Paul Nowak renewed calls for a windfall tax on banks alongside existing levies on energy company profits, arguing that lenders 'can well afford to pay more' to ease the burden on struggling households. Uswitch's Richard Neudegg warned of a difficult winter ahead, noting that customers on standard tariffs could face a further blow in January, while the Conservatives seized on the increase politically, with shadow energy secretary Claire Coutinho accusing Labour of breaking its promise to cut bills by £300 and instead presiding over an increase of nearly £400 since taking office.

Beyond the immediate reaction, reports pointed to a more uncertain outlook. Economists cited by some outlets noted that while higher wholesale gas prices will outweigh the benefit of the VAT cut on electricity for typical dual-fuel households, the overall effect on headline inflation is likely to be limited, even as broader inflation is expected to keep rising over the coming months amid pressures from food costs. Longer term, several sources flagged that European gas storage levels sitting near decade lows leave the market vulnerable to further price spikes as winter demand builds, meaning the risk to future bills is seen as skewed upwards rather than downwards. Taken together, the coverage frames this as the second painful adjustment to the price cap in three months, with little relief in sight before the next review in January.

Where outlets differ

The Guardian's news report (Source 1) and its rolling business live blog (Source 2) foreground the political narrative — Labour's unmet £300 bill-cut pledge, calls for windfall taxes on energy firms and banks, and quotes from Citizens Advice and the TUC — whereas the Daily Mail-style report (Source 3) leads more with the mechanics of the price rise, European heatwave-driven demand, and gives more prominent space to Conservative criticism from Claire Coutinho and consumer-site commentary from Uswitch's Richard Neudegg.

Only Source 2 provides the technical detail that the increase is actually 3.6% before Ofgem's rounding to 4%, and it alone includes market-level detail such as Brent crude oil prices (around $90 a barrel, up from $72.80 before the war) and economist Thomas Pugh's inflation analysis.

Source 3 is the only one to detail Cornwall Insight's specific forecast of a further ~9% rise (about £149) in January to roughly £1,872, and its quote from Craig Lowrey emphasising that the rises have 'very little to do with what is happening in Britain'.

Sources differ slightly on framing the war's starting point and actors — Source 1 refers to 'the war on Iran', while Source 2 specifies 'US-Israeli attacks on Iran in late February' — a discrepancy in specificity that readers should note.

Only Source 1 mentions the precise unit-rate changes for electricity and gas in pence per kilowatt hour and the alternative £1,940 figure under the old consumption methodology.

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