UK must prepare for 'longer term high energy prices', business secretary warns

The current high cost of energy might become a longer term problem. Credit: PA

The UK must prepare for "longer term high prices" in the energy market, the business secretary has warned, after the wholesale cost of gas rocketed by 70% since August.

Kwasi Kwarteng said the current cost of energy, which has "quadrupled" in the past six months, is "not something we think is going to be sustainable but we have to prepare for longer term high prices."

His comments at the Business, Energy and Industrial Strategy Committee came amid a feisty PMQs in which Labour's Angela Rayner berated Dominic Raab over the rising cost of living in the UK.

The deputy prime minister said the government was committed to removing the £20 uplift to Universal Credit, despite taxes, food prices and energy bills all rising - inflation is also at a record high.

Mr Raab said the uplift to Universal Credit was "always meant to be temporary" and it would be removed on October 6.

Angela Rayner stood in for Keir Starmer at PMQs, to face Dominic Raab who was replacing Boris Johnson while he meets Joe Biden in the US. Credit: Parliament

Ms Rayner attacked the government for refusing to keep the weekly uplift while pressing ahead with National Insurance tax rises that will "hit the pockets of working families by "cutting the income of a worker on £18,000 a year by over £1,100".

"That is almost exactly the same as an average annual energy bill. Just as energy prices are ballooning they have chosen to take the money that could cover a year's worth of bills out of the pockets of working people," the deputy Labour leader said.

Amid the soaring cost of energy caused by global shortages, the Labour frontbencher asked her opposite number to guarantee "that no-one will lose their gas or energy supply or be pushed into fuel poverty this winter?"

Mr Raab said the UK's energy supply will continue and he praised Business Secretary Kwarteng for taking "targeted action to support the two critical CO2 plants to make sure that not only do we see energy supplies through, but also food distribution".

But the Food and Drink Federation says customers will start noticing shortages within days as a result of the crisis in carbon dioxide supply, with supermarket shelves already appearing be impacted.

Shoppers have been sharing images of empty supermarket shelves during the UK's lorry driver shortage Credit: PA

Boris Johnson rubbished suggestions that gas prices could lead to panic buying at supermarkets this winter, saying the UK has robust food supply chains.

"I don't think that will happen," he said, "I think we've got very good supply chains, as I've been saying over the last few days, and what we're seeing is the growing pains of a global economy recovering rapidly from Covid".

Mr Kwarteng, who agreed a deal with CO2 supplier CF Fertilisers to restart production, told MPs at the business select committee that preparations were being made for gas prices to remain high for some time, despite Mr Johnson previously describing the problem as "temporary".

"I think 'temporary' means that it's a position where the price has spiked considerably... I think it has quadrupled in the last six months, seven months.

"You would expect normally that the price would revert to the mean, it's not something that we think is going to be sustainable.

"But, of course, we have to prepare for longer-term high prices."

It comes after Environment Secretary George Eustice told ITV News food prices are already rising over CO2 shortages and a number of other challenges following Brexit as the UK comes out of the coronavirus pandemic.

Environment secretary - 'Food price inflation is already happening':

"We've got challenges on shipping, we're seeing spikes in demand for gas - particularly in Asia - that's causing the increase in gas prices, labour shortages in parts of the economy and also some issues on logistics," the environment secretary told ITV News.

He admitted the combination of issues is "putting some pressure" on food supply chains but insisted they are "resilient" and firms are "managing to keep food on the shelves".

Mr Eustice accepted some supermarket bosses are correct in their claims that supply issues will drive up food prices.

"Food price inflation is already happening," he said, but costs "are rising from a very low base" with household expenditure on food "the lowest on record".

Watch PMQs in full: