Former chancellor and Conservative leadership hopeful, Rishi Sunak, has said that he will provide more financial support for households to help with rising energy costs if he succeeds Boris Johnson as prime minister.
The energy price cap is set to be increased by regulator Ofgem on August 26 and Sunak has said that he will seek to provide additional support for households, funded by government “efficiency savings across Whitehall” rather than “one-off borrowing”.
Sunak said that the strength of support provided would be determined by how far energy bills rise.
“As soon as we know how much bills will go up by, I will act,” he said.
Sunak added that he would “go further” than current government plans – announced during his stint as chancellor – by temporarily scrapping VAT and bringing in a one-off £650 payment to eight million households on low incomes.
However, Sunak has been accused of making “another big U-turn” by supporters of his leadership rival, Liz Truss.
The BBC quotes a source from within the Truss campaign as saying: “Three weeks ago, he (Sunak) was saying more borrowing was irresponsible and inflationary - has he changed his mind? How can Rishi's borrowing not be inflationary, but Liz's tax cuts are?
“Intellectually it's as watertight as a sieve.”
Both leadership candidates have jostled over their diverging plans to tackle the cost-of-living crisis, with Truss setting out a £30 billion strategy of lowering taxes to help households, encourage spending and stimulate the economy.
However, Sunak has dismissed Truss' suggestions, maintaining that they will increase the national debt and exacerbate inflation, with further borrowing having to fund the tax cuts.
Downing Street has announced that any decisions over further measures to help households with rising costs will be left to the new prime minister. The winner of the ongoing Tory leadership contest will not be announced until September 5.
The government has already been announced support in the form of a £650 payment for the eight million lowest-income households, an additional £300 for pensioners, and a payment of £400 for all households to help with bills. The package is funded by a 25 per cent windfall tax imposed on the UK profits of energy companies.
However, ministers are facing calls to do more and business groups and opposition parties have warned that additional support cannot wait, with the Confederation of British Industry’s Tony Danker urging Johnson and the two leadership contenders to come together and “agree on the principles” for another package of support now.
Scotland’s first minister Nicola Sturgeon has called on Boris Johnson to hold an emergency meeting with the leaders of the devolved administrations to discuss support, while the Liberal Democrats are pushing for the planned rising of the energy price cap in October to be stopped.
Sir Ed Davey’s party has suggested that extending the windfall tax on the profits of energy companies could be used as a means of paying for the resulting shortfall that suppliers will face.
The continued raising of the energy price cap every three months is expected to see the maximum yearly energy bill in England, Scotland and Wales increase to £3,615 with the average annual bill having stood at £1,400 in October 2021. The cap currently stands at £1,971.
If October’s price cap rise does not go ahead, energy suppliers will face a shortfall of some £36 billion while the Lib Dems say the average household will save £1,400 per year.
However, the Lib Dems say that higher VAT revenue from broader inflation and backdating the windfall tax to October 2021 means that government could plug the shortfall to ensure household bills stay lower while suppliers are able to afford higher wholesale prices.
The windfall tax as it stands is a 12-month temporary measure set to raise £5 billion, but the Lib Dems believe it could raise as much as £20 billion with the backdating and by increasing the tax to 30 per cent.
Sir Ed Davey said: "This is an emergency, and the government must step in now.
“Energy bills have already gone up by £700 this year, and Conservative ministers have barely lifted a finger to help.
“We simply cannot afford more inaction in the face of another even bigger rise in October.”
