Household bills will soar by more than £1,500 a year

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A cost of living crisis will see average households’ bills soar by more than £1,500 a year, experts warn today.

Families are now on the cusp of the biggest spending squeeze in nearly a decade as bills and prices rise relentlessly.

Money experts said a ‘perfect storm’ of price and tax hikes could push family finances to the limit across the country.

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Energy prices have rocketed this week, leading to suppliers pulling deals and predictions that average households could soon face paying over £400 extra a year on power bills.

A year ago, the best one-year fixed deal on comparison website Energy Helpline was £855 – but last night the cheapest available was more than double that at £1,895.

Petrol prices have also blown up, with the cost of filling a 50-litre tank rising from £56.55 to £67.30 since August last year.

The price of food and drink in shops and supermarkets rose by 1.1 per cent in August – the highest rate since 2008 – as retailers battled supply shortages and higher costs.

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Train fares, telephone and internet bills, and other day-to-day expenses are also increasing, while Boris Johnson’s health and social care levy means workers will have to pay an extra 1.25 percentage point in tax from next year.

There are also fears of hefty council tax rises – and there could be more bad news in Chancellor Rishi Sunak’s Budget next month.

Insurance experts warned that premiums will rise in January when firms are banned from reserving their best deals for new customers.

Inflation jumped from 2 per cent in July to 3.2 per cent last month in the biggest spike since 1997.

The perfect storm that sent prices spiralling 

A combination of events has caused wholesale gas and power prices to spike, meaning household energy bills are set to soar:

The figures, compiled for the Daily Mail by Hargreaves Lansdown, show it could all add up to cost average families an extra £132 a month – or £1,584 a year – in what will be the biggest rise in household spending costs since 2012.

Sarah Coles, a personal finance analyst at the investment company, said: ‘This is a squeeze on spending at a time when many people’s financial resilience has taken a beating as a result of the pandemic.’

Energy firms have this week pulled nearly all fixed deals from sale on price comparison sites as wholesale gas prices hit record highs. And some believe the power price surge means some suppliers will not survive the winter. 

Jane Lucy, of the auto-switching site Labrador, said: ‘It is not unrealistic to think that at least half a dozen firms could collapse this winter.’

Energy regulator Ofgem’s price cap protects around 15million households on standard variable tariffs. The cap has already risen by £139 to stop average standard variable tariff bills going above £1,277 – but experts said the wholesale price rises mean the cap may have to be raised a further £280 in the new year.

Myron Jobson, personal finance campaigner at Interactive Investor, says: ‘Consumers face a bleak reality of higher utility bills in the winter months. It will cost more to power the washing machine and even take a hot shower this winter.’

Laura Suter, of investment firm AJ Bell, said: ‘These increases will have a big impact on many families who were just about managing before.’ 

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