Energy bills forecast to rise above £4,000 in April

Typical household energy bills could reach £4,347 a year from April after the government said it would scale back support, an analyst has estimated.

The forecast from Cornwall Insight comes after the chancellor said the energy bill cap, which had been due to last for two years, would end in April.

The government said the most vulnerable would continue to be protected from soaring energy prices.

The forecasts could change depending on movements in wholesale energy prices.

The new Chancellor, Jeremy Hunt, announced the change to the energy price support as part of a package of measures designed to save money after the government's mini-budget left a big projected hole in the public finances.

On Monday, he said "it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices".

"The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need," he said.

The government's Energy Price Guarantee, which limits the price that suppliers can charge for each unit of energy, was originally put in place for two years from 1 October.

Now it will only be in place for six months, covering this winter, with the Treasury reviewing the support given from April.

Under the current cap consumers still pay for the gas and electricity they use. A typical household - one that uses 12,000 kWh (kilowatt hours) of gas a year and 2,900 kWh of electricity - currently faces an annual bill of £2,500. That is up from £1,277 last winter.

The details of support from April will be decided following a review, Mr Hunt said. He said those on lower incomes would be supported and there will be incentives to be more energy efficient.

Predictions from Cornwall Insight suggest that, for households that do not receive any support, a typical annual energy bill could be £4,347 in the spring, dropping to £3,722 next winter.

The original plan to cap prices for two years - thought to cost up to £150bn - was to be funded through government borrowing after the prime minister rejected calls to extend a windfall tax on oil and gas firms.

However, former Chancellor Kwasi Kwarteng followed it with plans to cut taxes by some £45bn.

Concerns about rising borrowing sparked turmoil on financial markets which spilled over into the mortgage market, where interest rates on loans have surged to 14-year highs.

On Monday, as he announced the review of the energy support, while also reversing £32bn worth of the planned tax cuts, Mr Hunt said he was doing "what is necessary for economic stability".

He added that the Energy Price Guarantee had been "the biggest single expense" of Mr Kwarteng's growth plan.