UK government takes credit for a drop in annual inflation from dropping the household energy ‘price cap’ ‘– but will it take the blame for increasing it far more in the coming months?
Smoke, mirrors and extra taxes.
From here:
Energy bills forecast to rise by £209 in July amid fears over winter cost crunch
“The household energy price cap is predicted to rise by £209 a year from July amid the fallout of the Iran war and experts warned over an impending payment shock from the autumn as demand surges in the cooler months.
Cornwall Insight said its prediction for Ofgem’s cap from July to September now stands at £1,850 for a typical dual fuel household, an increase of 13% on April’s £1,641 annual cap.
From Brave Ai:
“UK inflation fell to 2.8% in April 2026, down from 3.3% in March, marking the lowest rate in over a year and beating economist forecasts of a drop to 3%. This decline was primarily driven by a reduction in the Ofgem energy price cap and government support packages that lowered electricity and gas bills, alongside slower rises in food and water costs.”
However, this easing is widely expected to be short-lived. Analysts predict inflation will rise again, potentially reaching 4% by the end of 2026, as the full impact of higher global oil prices caused by the Iran war begins to filter through the economy. The ONS reported a sharp 23% annual rise in motor fuel prices in April, with producer input prices also surging to 7.7%, signaling upcoming cost pressures for consumers.
Core inflation (excluding volatile items like energy and food) dropped to 2.5%, the lowest since January 2022.
Food inflation eased to 3%, down from 3.7% in March, though the Food and Drink Federation warns it could hit 10% later this year.
The Bank of England is expected to hold interest rates steady at 3.75% in June, as the current low inflation is attributed to temporary energy bill relief rather than sustainable domestic economic cooling.
“The UK energy price cap has been cut by 7% (approximately £117 per year) effective 1 April 2026, reducing the typical annual bill for a dual-fuel household paying by Direct Debit to £1,641.
This reduction, driven primarily by government interventions that removed the Energy Company Obligation and shifted 75% of the Renewables Obligation costs to general taxation, results in a monthly saving of roughly £10. While network investment costs have increased slightly, the overall cap remains £208 lower than the same period in 2025.
Increasing taxes to reduce energy bills?!?
“Energy bills in Great Britain are predicted to rise significantly in the second half of 2026, reversing the drop seen in April. The current energy price cap, set at £1,641 per year for typical usage from April to June 2026, is forecast to increase by approximately 13% in July.
July 2026 Forecast: Analysts, including Cornwall Insight, predict the cap will rise to roughly £1,850 per year, adding £209 to a typical annual bill.
Primary Driver: This sharp increase is driven by soaring wholesale gas and electricity prices resulting from the conflict in the Middle East, specifically the closure of the Strait of Hormuz.
Future Outlook: Prices are expected to remain high, with further modest increases projected for October 2026 (to ~£1,923) and January 2027 (to ~£1,935), before a slight ip in April 2027.”
The April 2026 reduction to £1,641 was largely due to government budget measures removing certain green levies, but these effects are expected to be overwhelmed by global market shocks in the coming quarters. “
Smoke, mirrors and extra taxes.
Onwards!
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