Rishi Sunak has announced a help package for households worth £350 in an attempt to remove the “sting” out of rocketing energy bills, with the average customer facing an almost £700 increase.
The chancellor said the vast majority will receive support through council tax rebates — worth £150 — in bands A to D, and an upfront one-off discount on bills worth £200 in October.
However, he rejected calls to cut VAT on energy bills, an idea floated by Boris Johnson during the 2016 Brexit referendum, arguing it would “disproportionately benefit wealthier households”.
The chancellor’s intervention came moments after the energy regulator, Ofgem, announced a record-breaking increase to its price cap, meaning millions of households face a huge hike in energy bills.
The regulator said the maximum amount suppliers can charge 22 million retail customer will jump by more than 50 per cent — from £1,277 to £1,971 . It means a £693 per year increase for the average customer.
Updating MPs, Mr Sunak said it was “not sustainable” to keep energy bills “artificially low” amid global price increases, but said: “What we can do is take the sting out of a significant price shock for millions of families by making sure the increase in prices is smaller initially and spread over a longer period”.
Setting out his plans, Mr Sunak told the Commons: “We are going to give people a £150 council tax rebate to help with the cost of energy in April and this discount won’t need to be repaid.
“We have decided to provide the council tax rebate to households in bands A to D. This means around 80 per cent of all homes in England will benefit.”
The chancellor also vowed that all households would get a £200 one-off discount on energy bills from October, but would have to repay the amount in £40 instalments over the next five years.
He added: “And the third part of our plan will provide local authorities with a discretionary fund of nearly £150 million to help those lower income households who happen to live in higher council tax properties, and households in bands A to D who are exempt from council tax at all.”
Shadow chancellor Rachel Reeves, however, said that Mr Sunak was offering consumers a “buy now, pay later scheme that loads up costs for tomorrow”.
Energy consumers were being required to load up on future debt while oil and gas producers were offered loans and the chancellor “gambles that prices will fall”, she told the House of Commons.
Ms Reeves said the result of Mr Sunak’s proposals was “high prices as far as the eye can see – this year, next year and the year after that – giving with one hand and taking it all back later.”
Blaming a decade of Tory-led governments failing to invest in renewables or regulate energy markets, Ms Reeves said: “The Conservatives aren’t solving the cost-of-living crisis because the Conservatives are the cost-of-living crisis.”
The Conservative MP Stephen McPartland also echoed criticism, accusing the Treasury of lacking “ambition” and said it was a “huge missed opportunity by Rishi Sunak to support families courageously”.
With the imminent increase in tax through national insurance, the senior Tory MP Tom Tugendhat also said: “April showers won’t be cheap.
“The sudden surge in the cost of heating will hit families across the country just as the new NI tax kicks in. People need control of their lives by having control of their wallets – that’s why lower taxes matter for every home.”
Frances O’Grady, the general secretary of the Trade Union Congress (TUC), argued the chancellor’s measure were “hopelessly inadequate”.
She added: “For most families it’s just £7 a week and more than half must be paid back. It’s too little, it’s poorly targeted, and it’s stop gap measures instead of fixing the big problems.
“Britain needs a pay rise. The best way to help families is to get wages growing again. But this government has no plan to end pay misery.
“Ministers should be getting urgent help to families that need it most through raising universal credit. And we need a windfall tax on the excessive profits from North Sea gas to cut bills and boost investment in affordable energy.”
