Rishi Sunak is racing against time to finalise a package of measures aimed at alleviating the cost of living crisis, reported PA news agency.
The UK Chancellor, who has been widely criticised for failing to offer more help to the poorest people in his March Spring Statement, will reportedly offer an emergency energy package targeting those on the lowest incomes. There will also allegedly be help for the so-called “squeezed middle” of core Tory voters.
Sunak is believed to be meeting with Prime Minister Boris Johnson on Wednesday to "sign off" on the "multibillion-pound" plan, likely to be unveiled as early as Thursday, government sources were cited by PA as saying.
The measures have been prompted by a warning from the energy regulator, Ofgem, that household annual bills are expected to grow by more than 40 percent in October.
Jonathan Brearley, the watchdog's chief executive, wrote to Chancellor Sunak on 24 May to tell him that he expected the energy price cap to reach about £2,800 after its next increase in the autumn. That would represent a rise of more than £800 on last month’s figure. As of 1 April, the cap limiting what a supplier can charge for each unit of gas and electricity an individual uses was raised 54 percent by Ofgem, reaching £1,971.
“The price changes we have seen in the gas market are genuinely a once-in-a-generation event not seen since the oil crisis of the Seventies,” Brearley warned MPs on the business, energy and industrial strategy (BEIS) committee.
Brearley earlier insisted that present developments were unavoidable given soaring gas prices brought on by British, US and European Union sanctions on Russia since the launch of its special military operation in Ukraine. Labour and the other opposition parties in the UK Parliament had voted for the sanctions slapped on Russia by the Conservative government after the launch of the Ukraine operation on February 24. Prime Minister Boris Johnson had vehemently vowed to "wean" the country off oil and gas imports from Russia, despite the manifest economic blowback for his country.
Back in February Rishi Sunak provided £9Bln to help offset the rise in domestic energy bills. That included a £150 council tax rebate and a £200 loan. However, in late April he said he was waiting for more information on what would happen to energy bills in the autumn before clarifying how the Treasury would respond.
“Now I know people are anxious about this and wondering if they are going to go up even more, and I have always been clear from the beginning we will see what happens… But it would be silly to do that now or last month or the month before when we don’t know exactly what the situation in the autumn will be. So I’d say we’ll see where we are with that if we need to do more,” the Chancellor stated last month.
However now, after the warning of drastic fall-out from the rising energy cap, the Resolution Foundation think-tank said that anticipated developments in autumn would push almost 10 million families in England into “fuel stress". This means they would be spending more than 10 percent of their household budgets on energy.
The Bank of England also fed into the dire forecasts, estimating that inflation could top 10 percent in the autumn. All this has turned the heat on Sunak to do more to alleviate the impact of a cost of living crisis on households across the UK.
Emergency Energy Package
According to UK media reports, a new windfall tax on energy firms could be wielded by Treasury officials as a tool to help those who are struggling. This option was previously advocated by the Labour party and some senior Tories. The tax could target not just North Sea oil and gas producers but also electricity generators, including windfarm operators. The latter have reaped benefits from soaring global prices in recent months. The measure is likely to be used to fund a direct energy bill rebate as part of the response package, estimated to be worth up to £10Bln.
However, several cabinet ministers, including the energy secretary, Kwasi Kwarteng, and the Brexit opportunities secretary, Jacob Rees-Mogg, have objected to a windfall tax, claiming it would hamper investment.
Other potential measures cited by The Times include increasing the warm homes discount, winter fuel allowance and a cut in council tax.
Prime Minister Boris Johnson is reported to favour such steps as a VAT cut or bringing forward the 1 percentage point income tax cut that Sunak promised for 2024 as he delivered his Spring Statement.
According to cited insiders, Johnson and Sunak have been at loggerheads over their respective economic vision, with Tory MPs reportedly frustrated that this has delayed radical action to help struggling families.
When several sources suggested that the timing of the purported Thursday announcement would allow the government to deflect attention from the Sue Gray “partygate” report, a Downing Street spokesman told the BBC he would “refute any suggestion” that that was the case.