Ministers must solve the energy crisis or face a devastating voter backlash

If you thought last year was bad, wait until you see what 2022 has in store. One think tank has already dubbed it “the year of the squeeze” - the moment when stalling wages collide with spiralling taxes, rising interest rates, and inflation at 30-year highs, in devastating fashion. A “cost of living catastrophe” beckons for millions, the Resolution Foundation warns.

Yet strangely, when it comes to the biggest threat to household finances - soaring energy prices - the Government seems either reluctant to act or unsure of how to, despite a crisis that has been raging since the summer.

A summit between the Business Secretary, Kwasi Kwarteng, and energy bosses over the Christmas break ended without a breakthrough. The best that the Prime Minister could do at a press conference on Tuesday was to tell reporters that the Chancellor was “mindful” of the problem, whatever that means. For those worst affected, such generalities offer zero reassurance.

Yet, the energy shock isn’t about to magically disappear. On the contrary, experts and industry figures have warned repeatedly and consistently that it is about to get a lot worse for millions of households, many of which will be unable to withstand the expected hit.

Wholesale gas prices may have levelled out in recent weeks but they are still trading at more than three and a half times the levels of just a year ago, and they are on the rise again.

In April, 15m households are set to be hit by a surge of as much as 56pc in their bills - equivalent to another £720 a year - when the energy price cap is lifted again. A spike of that magnitude would push the average annual energy bill over the £2,000 mark. This has been widely acknowledged for some months now.

As the campaigner Martin Lewis points out, there will be millions of people who can afford the increase, but there are also millions for whom it will be “a monumental hit” and face being thrown into fuel poverty.

That shouldn’t be happening in modern day Britain. In the 21st century, being able to heat your home should be a basic right whoever is in Number 10.

The energy industry has called for state intervention to alleviate what it calls a “national crisis” and “a system-wide issue”, and yet the Government continues to sit on its hands.

Minsters plead that there is only so much that they can do, pointing to existing schemes for the most vulnerable including the £500m household support fund, warm home discount, and winter fuel payments, but that simply doesn’t stack up.

With charities warning that a further 2m people are likely to join the existing 4m already living in fuel poverty, and energy bosses predicting another 20pc jump in bills to as much as £2,240 in the autumn, the Government clearly must do more, and it can.

The energy trade body Energy UK points out that suppliers are able to influence just a fifth of the cost of bills, while the Government sets other costs such as green energy levies and VAT. Scrapping the former and cutting the latter could save as much as £300, while a proposed industry-wide loan scheme could help spread the burden of sky-high prices over several years.

E.On has recommended a more radical approach to reduce the immediate burden on bill-payers, whereby the Treasury takes some or all of the cost rises onto its balance sheet, allowing sudden spikes to be repaid later.

Rishi Sunak won’t like the idea of tax breaks, even less so direct financial intervention but as Lewis argues, it actually doesn’t matter what the method is. What matters is that millions of people aren’t forced to make a grim choice between heating and eating.

Still, if the economic and social costs are not enough to wake the Cabinet from its slumber then the political fallout should be for a Government whose popularity has suffered serious damage in recent weeks.

Craig Mackinlay, who chairs the Net Zero Scrutiny Group of Tory MPs, has put it in plain terms. “Elections are won and lost in people’s wallets and purses,” he said this week.

With the London elections looming in May and Tory peer and respected political analyst Lord Hayward predicting one of the worst results in half a century for the Conservatives, ministers are running out of time to act.