ENERGY · BORROWING · THE COST OF LIVING

When £1,700 Becomes the New Normal

Bills climb. Borrowing costs follow. Then we get used to both.

I remember paying roughly £500 a year for gas and electricity. Our bill is now around £1,700. That is one household’s experience, not a national average. But the national figures show how far the baseline has moved.

THE RISING BASELINE Estimated annual dual-fuel bills
Annual household energy bill comparison A bar chart shows £509 in 2000, £1,105 in 2010, £1,211 in 2020 and £1,723 for October to December 2026. £509 2000 £1,105 2010 £1,211 2020 £1,723 2026*

Cash figures, not adjusted for inflation. Consumption assumptions and methods differ, so this is a timeline of estimates—not a like-for-like bill for one flat. The 2026 figure is Ofgem’s annualised typical price-cap amount for October–December, not a limit on total household spending. Sources and definitions ↓

That is how the new normal takes hold: a jump shocks us, the next bill arrives, and soon the higher figure is the one we budget around.

FOLLOW THE COST From global fuel markets to the household meter
How energy-market costs reach households A simple diagram connects global oil and gas markets to wholesale prices, the electricity grid, and household bills. Oil & gas Wholesale prices Electricity grid Home bill

A simplified route, not a claim that one market movement explains every part of a bill. Prices also reflect networks, policy costs, standing charges and household use.

Relief has a bill too

The £400 Energy Bills Support Scheme was a non-repayable credit paid in instalments. Liz Truss’s Energy Price Guarantee was different: it capped unit prices and the government paid suppliers the gap. The National Audit Office later put eight energy-support schemes for households and businesses at £44 billion. That was public spending, not free money; windfall taxes on energy profits helped the public finances, but the cost still competes with tax, borrowing and other spending.

Today’s electricity VAT cut is smaller and temporary: 5% to zero through March 2027, with gas still at 5%. The government estimates it will cost £850 million this financial year and says it is funded by cancelling the Digital ID programme. A tax cut can ease a bill, but it still means choosing where public money goes.

BORROWING COSTS · 1 OCTOBER 2026

A different rate, the same squeeze

The UK’s 30-year government-bond yield briefly topped 6%, its highest since 1998. That is not a mortgage rate. And the “near-zero” period was 0.1% Bank Rate, not literally zero: it was cut in March 2020 and first raised to 0.25% in December 2021. The Bank sets monetary policy independently; the fair question is who benefited from years of cheap credit—and who is now carrying the cost of higher borrowing.

Andy Burnham’s announced summer tour put cost-of-living concerns alongside a ten-year plan for growth. The test of growth is simpler: after energy, housing and borrowing costs, does an ordinary household have more left? Costs have grown. Families have learned to absorb them. That is not the same as growth being felt.

Sources and definitions
  1. UK Parliament Hansard: 2000 annual energy bills — direct-debit assumptions: 3,300 kWh electricity and 18,000 kWh gas.
  2. Ofgem: Electricity and Gas Supply Market Report, September 2010 — August 2010 typical bill and usage assumptions.
  3. DESNZ Annual Report 2024–25 — annual household bill series, including 2020.
  4. Ofgem: October–December 2026 price cap — 4% increase, £1,723 annualised typical bill, and VAT treatment.
  5. HM Government: temporary electricity VAT cut — expected cost, funding decision and estimated typical saving.
  6. HM Government: Energy Price Guarantee; House of Commons Library: £400 Energy Bills Support Scheme.
  7. National Audit Office: final cost of energy-support schemes — £44 billion across eight household and business schemes.
  8. Reuters: 30-year gilt yield, 1 October 2026; Bank of England: Bank Rate cut to 0.1%; Bank Rate raised to 0.25%.
  9. ITV News: Burnham’s announced summer tour.