UK unveils €10.7bn package to ease household energy bills this winter

Energy prices have spiked around the world — and products including coffee and new cars could be next.

UK chancellor Rishi Sunak says the UK government can 'take the sting out of' rising energy prices for the British public. 

UK chancellor Rishi Sunak announced a raft of measures as the British government sought to get a grip on a burgeoning cost-of-living crisis, with millions of people facing record increases in their energy bills.

“The government is going to step in to directly help people manage those extra costs,” Mr Sunak said in the House of Commons, saying his intervention was worth £9bn (€10.7bn). 

“We can take the sting out of a significant price shock for millions of families.”  

Adding to the pressure on the economy, the Bank of England on Thursday raised its key interest rate by 25 basis points, with four policymakers calling for a larger 50-point hike.

The policies announced by Mr Sunak include a £200 upfront discount on domestic energy bills applied from October, financed by the government and repaid by households in annual £40 instalments over the next five years, and a £150 council tax rebate for 80% of all homes in England, starting in April. 

It also includes discretionary funding for local authorities to help vulnerable people who do not pay council tax or who live in the other 20% of homes. 

The European Commission said in October that EU countries could use a "toolbox" of measures, including subsidies to help poorer households, funding for renovations that reduce energy use, or exempting vulnerable households from higher energy taxes. 

The Irish Government said it would subsidise household utility bills by €100.  

Inflation has ignited around the world amid a global energy crunch and supply chain snarl-ups that have made making and trading goods much more expensive. 

World food prices rebounded in January and remained near 10-year highs, led by a jump in the price of vegetable oils, the UN's Food and Agriculture Organisation, or FAO, said on Thursday. 

The FAO has warned that the higher costs are putting poorer populations at risk in countries reliant on imports.

Meanwhile, from Seoul to Seattle, the soaring cost of coffee beans is trickling into the cups of consumers. 

Futures for arabica coffee jumped 76% in 2021, hitting decade highs after droughts and once-in-a-generation frosts damaged crops in Brazil, the world’s top producer. 

Big coffee retailers will generally buy stock months or years in advance, meaning a further price onslaught could be in store.

The next 12 to 18 months will be tough for the consumer, and we expect prices to rally further this year,” said Geordie Wilkes, head of research at brokerage Sucden Financial in London. 

German carmakers may also be raising prices for customers, whose demand for new vehicles is outstripping supply still beset by bottlenecks, according to the Munich-based Ifo economics institute, which compiles the country’s most-watched business survey. It says the situation in the car industry improved at the start of the year, even though conditions for parts manufacturers became worse.

“A possible reason for this is that automakers succeeded in getting customers on board with price increases, whereas suppliers have not,” said Oliver Falck, director of the Ifo Centre for Industrial Organisation and New Technologies.

Bloomberg, Reuters, Irish Examiner