Boris Johnson has confirmed he is “looking at” what his government can do to reduce the cost of household energy bills amid soaring prices.
Speaking to reporters on a visit to a pharmacy in Uxbridge on Monday, the PM said he had discussed cost of living pressures with Chancellor Rishi Sunak on Sunday night and believes ministers have “got to help people, particularly on low incomes”.
It comes after Labour proposed removing VAT on bills for a year and a windfall tax on North Sea oil and gas producers as part of a package designed to save households hundreds of pounds on their energy costs.
A £6.6bn plan unveiled by the party this weekend would also see the party expand and increase the war, home discount for those most at risk.
Labour says the package of support would save most households around £200, while targeted support to those on lower incomes, pensioners and the squeezed middle would mean they save as much as £600.
The warm home discount scheme is a one-off £140 rebate on energy bills given to two million people in England and Wales – one million people on pension credit and one million families on working age benefits.
The government already plans to expand to around three million people this year – and increase the rebate to £150.
Rising energy costs ‘making life very tough’
Mr Johnson’s government has come under concerted pressure to act in recent weeks, amid worries over the rising cost of living.
Experts have predicted that rising wholesale costs will result in a 50% rise in bills from April, when the latest change to the energy price cap takes effect.
If this comes to pass, an average household on a supplier’s default tariff would face paying nearly £2,000 a year for gas and electricity, compared to under £1,300 at the moment.
The PM told broadcasters on Monday that he has been meeting the chancellor “constantly” to talk about the issue, including “last night”.
“I understand how difficult it is for people, I understand the pressures that people are facing on household finances. This is the result of global price spikes as a result of the economy coming back from COVID,” the prime minister said.
“But it’s making life very tough. And we’ve got to make sure that people are aware of all the things that they can do, all the money that we’re putting in via local councils to help people in hardship, the cold weather payments, the warm homes discount, the money for pensioners.
“Altogether, the package altogether to support people and particularly to support the energy, the cost of heating, is about £4.2 billion.
“But you know, I understand how difficult it is. And we’re certainly looking at what we can do.”
Noting that the eurozone is “seeing the same problem”, the PM continued: “We’ve got to help people, particularly people on low incomes, we’ve got to help people with the cost of their fuel, and that’s what we’re doing.”
Under Labour’s plans, North Sea oil and gas producers would be required to contribute £1.2bn to fund the measures, through an increase to their corporation tax of 10 percentage points that would last for a year.
A forecast extra £3.1bn in VAT receipts as a result of rising prices would help pay for the proposals, while the projected £2.3bn of additional North Sea oil and gas receipts would make up the rest of the cost, it says.
A total of £3.5bn would be spent on expanding the warm home discount, increasing it from £140 to £400 a year.
Labour says it would also double the number of eligible households to 9.3 million.
According to the party’s figures, it would cost around £2.5bn to remove VAT from household energy bills for a year from April, which is six months longer than Labour has previously called for.
Mitigating the costs of supplier failure by removing them from customers’ bills would cost £2.6bn, while a contingency fund to provide support to energy intensive firms would cost £600m.
Sir Keir Starmer told reporters his party was stepping into the “vacuum of leadership” left by the PM on the issue.
Gove hints warm home discount could be expanded
Speaking to Kay Burley on Monday, Levelling Up Secretary Michael Gove said it was important to “look at a range of options” when asked about the prospect of cutting VAT on energy bills to help with rising costs, adding that there is already support in place.
“I think we should always seek to cut taxes where we can but also it’s important when we are providing support for people that we also target it most on those who need it most,” Mr Gove told Sky News.
Mr Gove reiterated twice that support for energy bills should be “targeted at those most in need”, which suggests ministers could be considering expanding the warm home discount.
Speaking to reporters later on Monday, the prime minister’s spokesperson said he did not have a timeframe of when extra help could come.
He said Mr Johnson had “led a number of meetings” on the issue, adding: “Certainly the challenges of things like global energy prices are things they discuss on a regular basis and they’ll continue to do so.”