Households are unlikely to receive further energy bills support before the October price cap, though more targeted measures could be looked at if there is a further shock in January, government sources said.
Gas and electricity prices will rise by 4% from October under the new cap. The government has already removed VAT from domestic electricity bills to save average households £45 a year, in a move announced in Andy Burnham’s first week in office.
Prices had previously climbed by 13% at the start of July to take account of global energy market price rises caused by the US war on Iran and the closure of the strait of Hormuz.
Burnham said on Wednesday rising energy bills were “difficult for people and I recognise that” but stopped short of promising intervention beyond the VAT cut, saying the government “would continue to look as we go forward at how we get energy prices down in the long term”.
Miatta Fahnbulleh, the energy secretary, said bills were being driven up by the Iran war and the government would “keep looking at what more we can do to protect families from unaffordable bills”.
The chancellor, John Healey, said on Wednesday that the government would look again towards the end of the year at whether more support was needed. “No government can stop the squeeze felt by families and businesses with a global shock of this magnitude. It’s being felt around the world. But we can keep close watch as we move towards the New Year, and we remain focused on giving families a bit of breathing space with the cost of living,” he told the Sun.
“We’re a government that will look for practical action – working to put our country on a more resilient footing so we can better weather these shocks in future.”
The Resolution Foundation thinktank, which has close ties to the government, suggested there should be targeted support designed, costed and ready to switch on if needed from January – when bills have been forecast to rise again by up to 9%.
It said this should go beyond those on benefits and target those earning under £24,000 a year, reaching about 40% of households with potential savings of £175 on average for eligible households.
The thinktank’s chief executive, Ruth Curtice, said: “The rise in energy bills in October has been tempered but not avoided by the government’s decision to reduce electricity bills for everyone through a VAT cut. With wholesale gas prices hitting new post-Iran highs in the past week, there is a real risk of further rises in January. Given the acute pressure on both family and government budgets, we need a better mechanism for targeted support ready to activate if needed.”
The Trades Union Congress has renewed its call for a windfall tax on bank profits to pay for a cut to bills. Its general secretary, Paul Nowak, said the government should be looking at ways now to fund more support for households this winter. “The government is going to have to keep going on measures to boost living standards – starting with a tax on banks’ enormous profits to cut energy bills for the majority of households,” he said.
“It’s the right thing to do. Banks are raking it in while many up and down the country are struggling to get by – they can well afford to pay more tax.”
Healey’s predecessor Rachel Reeves was preparing targeted support for energy bills before Burnham became prime minister. She told the Commons in March she wanted to “ensure that we are in a position in the autumn to have a targeted approach”.
Government sources suggested that any further support would be costed in the budget and officials would wait to see how the conflict in the Gulf developed over the coming months – including whether the strait of Hormuz could be reopened.
Burnham has suggested he is open to allowing more drilling sites in the North Sea if a quasi-judicial process approves exploration of the Jackdaw and Rosebank fossil fuel sites.
That is likely to cause a backlash from some Labour MPs but in a interview with the FT, Burnham pointed to the “pragmatic approach” taken by the green energy entrepreneur and climate campaigner Dale Vince, who recently backed both schemes on the BBC’s Newsnight programme.
Ed Miliband, the former energy secretary and now foreign secretary, once called the Rosebank proposal “climate vandalism” and climate experts have warned the environmental damage caused by developing the oil and gas fields would destroy any economic benefits.
