People on £45,000 could struggle with bills, says chancellor

People earning around £45,000 a year, as well as those on benefits, could need government help to pay their energy bills this winter, the chancellor has said.

Great Britain’s energy industry regulator, Ofgem, on Friday confirmed an 80% rise in the consumer price cap from October that will take a typical household’s gas and electricity bill from £1,971 to £3,549 a year.

In an interview with the Daily Telegraph, Nadhim Zahawi said things would be “really hard” for middle-earners, as well as society’s most vulnerable.

Every household in England, Scotland and Wales is due to receive a £400 rebate on energy bills in coming months, while those on universal credit and other benefits will receive £650.

Zahawi said: “My concern is there are those who aren’t on benefits. If you are a senior nurse or a senior teacher on £45,000 a year, you’re having your energy bills go up by 80% and will probably rise even higher in the new year – it’s really hard.

“If you’re a pensioner, it’s really hard. So universal credit is a really effective way of targeting, but I’m looking at what else we can do to make sure we help those who really need the help. We’re looking at all the options.”

Chart of energy price cap changes

Charities have warned the rise could completely “wipe out” the incomes of poorer households, leaving millions with the threat of bills they cannot pay or the choice between heating and eating this winter.

Zahawi said on Friday that Britons should consider cutting down on energy use in light of the huge rise in bills they will face given the new energy price cap.

The Tory leadership contenders, Liz Truss and Rishi Sunak, have pledged support but neither have outlined details of how they plan to do this.

‘There is war on our continent’: chancellor says people should cut energy use – video

The foreign secretary, who is the frontrunner to be the next prime minister, has promised “decisive action” to deliver “immediate support” if she wins the keys to No 10.

However, she has so far been vague about what form this assistance might take besides slashing green levies on energy bills and reversing the controversial national insurance hike.

She has argued it is not “right” to announce her full plan before the contest is over or she has seen all the analysis being prepared in Whitehall.

Her rival, Sunak, has said he will provide additional support targeted at the most vulnerable.

Map of energy price ‘crisis hotspots’ in England and Wales

Zahawi has declared he is working “flat out” to draw up options for a plan of action for the next PM so they can “hit the ground running” when they take office in September.

But he refused to rule out freezing the energy cap as suggested by Labour, insisting “nothing is off the table”.

He said: “My concern about it is that it is universal. You’re helping wealthier households, households like mine, where we can withstand the additional pressure of high energy costs, and that takes away from your ability to be resilient over the long term.

“It would be about £100bn in about 18, 24 months. If I targeted that help, I’d be able to deliver more help to the most vulnerable.”

He also reportedly said he is weighing up potential action to help small firms including Covid-style cuts to VAT and business rates to support the hospitality and leisure sectors.

“If we don’t help those small and medium enterprises, my concern is the scarring effect, the longer-term scarring effect on the economy,” he said.

“So what we did on business rates, what we did on VAT for particular sectors like hospitality. So we’re working up all those options to look at those.

“And of course Liz Truss has talked about removing a moratorium on the green levies for a couple of years. We’re looking at that as well, which will help everyone with about £150.”

Chart showing percentage of poorest to richest households paying for electricity and gas via prepayment meter

Another option on the table is granting large loans to energy suppliers to help cut bills by up to £500 a year, the Daily Telegraph said.

Labour has argued that its own plan to freeze energy bills this winter would save someone on the minimum wage more than £40 a week.

However, the cost of its proposals have been called into question by fact-checkers, who claimed the party had not taken into account that people use more energy in the winter, causing it to underestimate the plan’s price tag by at least £5bn.

Labour sources disputed the charity Full Fact’s analysis and said the party had costed its plans based on consultation with Ofgem.

Ofgem’s chief executive, Jonathan Brearley, said the incoming prime minister and new cabinet should “provide an additional and urgent response to continued surging energy prices”.