Biggest squeeze on families since 1920s as fuel and food prices soar (U.K.)

£200 shock on your power bill: Biggest squeeze on families since 1920s as fuel and food prices soar

By Sean Poulter
Last updated at 9:08 AM on 8th June 2011

Pain: Scottish Power has announced a 'huge increase' in fuel prices raising gas bills by an average of 19 per cent and electricity bills by 10 per cent, leaving millions out of pocket

Families face a fresh round of energy price rises that will add almost £200 to bills.


Scottish Power last night announced gas tariffs are to rise by 19 per cent, with electricity up 10 per cent.


The move – sure to be followed by rivals – will add an average of £187 to annual bills, taking the figure to £1,398 for a dual fuel contract paid by cash or cheque.


It comes as a report reveals food prices are rising at their fastest rate in two years – 4.9 per cent. Air passengers, meanwhile, face an 8 per cent hike in fares caused by soaring oil prices and taxes.


The fuel and food rises are imposing the biggest squeeze on household budgets in almost 100 years.


They are sure to prompt a fresh surge in inflation which is already running at 4.5 per cent. This, in turn, will lead to pressure on the Bank of England to raise interest rates which have been at an historic low for the last two years.


Scottish Power, which has 2.4million customers many of whom live in England, is owned by the Spanish conglomerate Iberdrola. The sheer scale of its price rises massively outpace increases in wages and pensions, so piling pressure on families.


A study by the Institute of Fiscal Studies today reveals many of the country’s poorest pensioners already face a nightmare choice between heating and eating.


It found a significant proportion are going without food for fear they will not have enough money to cover the cost of heat and light.


This was confirmed by Una Farrell, of the Consumer Credit Counselling Service, who said: ‘Energy bill rises are yet another nail in the coffin for many peoples’ once comfortable lifestyles.


‘I am concerned that mounting pressures on family budgets will force many to choose between heating their homes and putting food on the table.’


Increases in the cost of energy and food mean the Government’s hopes of hitting the official inflation target of 2 per cent have been blown apart.

Two months ago, the energy industry watchdog criticised the 'Big Six' power giants - including Scottish Power - in a damning report and said the public had 'lost trust' in them 

Scottish Power's Headquarters in Glasgow, where its bosses say they have been forced to raise their gas and electricity prices again

Britain’s energy market is dominated by a ‘big six’ group of suppliers. Scottish Power’s decision is expected to be followed by most, if not all, the five other major players – British Gas, Scottish & Southern Energy, EDF, E.on and nPower.


The news comes as regulator Ofgem investigates the industry for profiteering. It said firms were guilty of raising tariffs quickly when wholesale prices rise yet drag their heels in reducing them when the figure they pay for energy falls.


British Gas made record profits £742million last year, while those for its parent company, Centrica, soared by almost a third to £2.4billion.


Core profits at Scottish Power were £1.2billion in 2010, which was down by 7 per cent on the year before.



Scottish Power justified the increases, which will come into effect in August, by claiming its hand had been forced by higher wholesale prices.


Head of energy at the official customer body, Consumer Focus, Audrey Gallacher, said: ‘Customers will be shocked at the scale of this rise.


‘Scottish Power itself is under investigation by the regulator for unfair pricing and mis-selling. Customers want fair pricing, fair selling and fair treatment.’


Director of consumer policy at uSwitch.com, Ann Robinson, warned the country was in danger of seeing a repeat of 2008 when energy bills rocketed by £334 or 41 per cent as a result of consecutive rounds of price hikes.


‘Ofgem will need to consider whether these increases are justified or not and act swiftly to protect consumers,’ she said.

Warning: Energy Secretary Chris Huhne said families could protect against price hikes by lagging their lofts and installing double glazing

The Scottish Power rise takes its average annual bill to the highest level on record. Its UK retail director, Raymond Jack said: ‘We have done what we can to absorb these additional costs for as long as possible to minimise the impact on our customers.’


The IFS research showed that 7 per cent of the poorest pensioners cut back on food spending during cold spells in order to save the money they need for heating.


Last night Energy Secretary Chris Huhne responded to the hikes by suggesting families can protect themselves by lagging their lofts and installing double glazing under a Green Deal scheme.
He also said  investment in wind farms would ensure cheaper energy bills in the future.’


Labour accused the Prime Minister of letting consumers down. Meg Hillier MP, shadow energy spokesman, said: ‘The news of these price hikes shows that, contrary to his pre-election promises, David Cameron has failed to  take action to curb excessive rises in the cost of energy.’