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Power bills ‘to bring back 70s gloom’

Household energy bills will soon be as unaffordable as they were in the bleak years of the 1970s, analysts said yesterday.

Four per cent of all consumer spending will be eaten up by the cost of heating and lighting the home by 2015, according to Deutsche Bank. It said that the cost was expected to rise by a quarter over the next four years.

Analysts blamed the likely increases on rising global energy prices and costly subsidies for wind power and energy efficiency.

Bills have already gone up by 15 per cent this year amid a fall in consumer spending. Deutsche Bank said that as a result energy bills would cause the biggest squeeze on household finances since the 1970s, when oil prices soared and Britain’s economy stagnated.

Deutsche said that the impact of energy costs on households could be lessened by abandoning Britain’s green targets. Sam Laidlaw, the chief executive of Centrica, warned recently that this would be necessary if public resistance to higher bills continued.

The bank also warned that companies needed to start building new power plants within two years to replace ageing coal plants being shut down. But it said that this would not be viable unless wholesale electricity prices rose by 50 per cent.

The issue of energy bills has climbed up the political agenda in recent weeks. George Osborne attacked environmental regulation last week for “piling costs” on to households and businesses. The Treasury is also understood to be resisting new renewable energy subsidies backed by the Energy Secretary Chris Huhne and other ministers.