Martin Lewis warns against cancelling energy bill direct debits as price cap soars

Consumer champion Martin Lewis has warned households against cancelling direct debits for their energy bills as the price cap is set to soar by 80 per cent in October.

Regulator Ofgem has revealed that the price cap, which is supposed to protect consumers from unfair energy bill increases, will rise to £3,549 per year for an average household – more than three times last winter’s level

After the new price cap was announced on Friday, the Money Saving Expert founder said people would die if the government did not intervene with adequate support measures.

“More help is desperately needed for the poorest or people will die this winter due to unaffordability of an 80 per cent so far energy price cap hike,” Mr Lewis said.

Providing more support advice for anxious households following the announcement, Mr Lewis hosted a YouTube Q&A where he recommended households do not switch their payment methods as direct debits are based on estimates of usage.

Mr Lewis said that families who are looking to change over their payment plans could be affected more in the long run.

One MoneySavingExpert.com reader asked if she should cancel her direct debit and switch to paying her bill on receipt to control her finances better.

He replied advising against this, saying: “You will get a short-term cash flow gain from switching to paying in receipt of bills.

“However, over the longer run, because you’re paying more for each unit of energy you use, you will pay more in receipt of bills.

“Because if you overpay on direct debit you are entitled to that money back.”

At current market prices, the cap would exceed £5,500 a year by January and £7,000 by April, as analysts warned that the cost of gas could go higher still as Russia further squeezes vital supplies relied on by European countries. That would deepen the problems faced by millions of low-income families, who will already struggle to afford adequate heating and power through the colder months.

Even at the October cap level, poorer households will see their incomes “wiped out”, the Joseph Rowntree Foundation (JRF) said. The charity calculated that an average low-income family will have to pay four and a half times more for energy in 2023-24 compared with last year, while single parents will hand over almost two-thirds of their income after housing costs. Energy bills for low-income adults will exceed 120 per cent of their income.

Middle-income families will see almost a fifth of their earnings go on gas and electricity, prompting fears that businesses will collapse as people tighten their belts and spend less on non-essential items. Chancellor Nadhim Zahawi said people on £45,000 will need help.

He said the Treasury was exploring “all the options” to help households, adding that the country was in a “national economic emergency [that] could go on for 18 months, two years”.