No one should be cut off if they can’t afford energy bills, says Zahawi

The chancellor, Nadhim Zahawi, has said households should not be cut off if they cannot afford their energy bills, as the Treasury examines a range of options to help consumers cope with the cost of living crisis.

Zahawi promised that the government would expand on the £37bn package of aid announced earlier this year to help households tackle soaring energy costs. He told Sky News: “No one should be cut off because they can’t afford their bills.

“I am working with the [energy] companies … to make sure those people who are really struggling get that help both financially and personally.”

Consumers are not automatically cut off if they do not pay energy bills, but UK charities have warned a group urging customers not to pay this winter that there could be serious consequences.

Zahawi said he was “deeply concerned” about vulnerable people freezing this winter because they cannot afford to turn their heating on.

He said a fresh package of support would “go beyond” the £37bn “because we know we need to send the message to Mr Putin that this strategy is not going to work, which is why we have to target help to the most vulnerable to allow us to stretch that help as far as we can”.

Gas prices have been forced higher as Vladimir Putin’s regime has slashed supplies from Russia into Europe in retaliation for sanctions imposed following the invasion of Ukraine, pushing up prices for consumers and causing fears of blackouts this winter. Last week the energy regulator, Ofgem, raised the next price cap, taking effect in October, to £3,549.

Zahawi said there were “no easy options” to tackle the crisis but the Treasury was “preparing all the options”.

Asked if there are two separate plans being worked up, depending on whether Liz Truss or Rishi Sunak becomes prime minister next week, Zahawi said: “No, what we’re doing is making sure we look at the pledges from both candidates but also look at everything else that we’ve told by the energy sector.”

He added: “I’m working with the Bank of England to look at how we can provide better liquidity in the wholesale market for energy. They tell me that would actually help with about £400 to £500 of reduction in the energy price cap.”

He also said he was looking at trying to enter an agreement with companies developing power from other sources such as renewables for “a voluntary contract for difference … at a lower price”, but added: “That will not be ready until next winter.”

Truss, the Tory leadership candidate widely tipped to replace Boris Johnson as prime minister, has indicated she would suspend green levies on energy bills.

Asked whether the measure would be taken, Zahawi said: “Not necessarily because actually we have some headroom at the moment, certainly if you look on the capital side of the balance sheet.

“There are no easy options. That’s the one thing we know,” he said.

Zahawi is widely expected to be replaced as chancellor by the business secretary, Kwasi Kwarteng, if Truss becomes prime minister next week.