Council tax bills are expected to be cut for poorer households to ease the pain of the energy price cap soaring to around £2,000 a year.
Rishi Sunak has drawn up plans for rebates for lower-value properties, amid criticism that state-backed loans to energy suppliers – providing £200-plus discounts to all homes – will fall short of what is needed.
The regulator Ofgem will reveal the new price cap at 11am, with bills tipped to rise by around £600, or 50 per cent, on 1 April, because of surging wholesale gas prices.
The chancellor has ruled out a windfall tax on the energy giants and appears to have rejected Tory MPs’ pleas to remove green levies from household bills.
Instead, taxpayers are expected to underwrite loans to suppliers, who will in turn give households a rebate on bills, limiting the immediate impact of bill hikes in April.
But the help would not be permanent – because the firms would recoup the money from customers in future years to pay back the loans as energy prices fall, if they do.
Torsten Bell, head of the Resolution Foundation think-tank, said the pain would only be deferred, warning: “Higher bills tomorrow for not quite such a big bill rise today is a massive political gamble.
“People will be paying for 2022’s energy bills when they go to vote in 2024 (the only benefit of this approach is it keeps it largely off government books).”
Some experts have warned gas prices could remain high until 2025, and supplies could be threatened if Russia invades Ukraine.
And the cap, the maximum amount suppliers can charge customers for each unit of energy, could rise again by as much as £400 in six months’ time, for next winter.
Under the new plan drawn up by the Treasury, people in lower council tax bands would receive further rebates funded by government grants.
Mr Sunak is under pressure to go further, after Labour unveiled plans to save households £200, with targeted support of up to £400 for the poorest, partly funded by a windfall tax on energy firms.
However, council tax rebates will be criticised as a less effective way of reaching the poorest households than Labour’s plan to dramatically expand the warm homes discount.
Bands are based on property prices in 1991 – after successive governments ducked out of an unpopular revaluation – which means many wealthy people, particularly in London and the south east, live in lower band homes.
Ed Miliband, Labour’s climate spokesman, insisted a one-off windfall tax was justified to ease the cost-of-living crisis.
“With oil and gas profits booming in recent months because of the spike in energy prices, it is clearer than ever that the North Sea oil and gas producers who have made a fortune recently should be asked to contribute,” he said.
