Tens of millions of pounds will be set aside to support the poorest households with spiralling energy bills, Sir Keir Starmer will announce, as he attempts to ease the chaos triggered by the crisis in the Middle East.
Vowing to support working people “whatever challenges lie ahead”, the prime minister will use a press conference on Monday to set out plans to assist those reliant on heating oil – which is not covered by the energy price cap – with a £50m package of assistance.
It comes after the government opened the door to scrapping a planned fuel-duty hike in response to the rise in energy prices caused by the US/Israeli war with Iran.
Energy secretary Ed Miliband said on Sunday that ministers will intervene over bills if necessary, insisting that the government is “going to stand by people in this crisis”.
Fears of another cost of living crisis, similar to what happened in 2022 as a result of Russia’s invasion of Ukraine, have been heightened by the price of oil rising more than 20 per cent to above $100 (£76) a barrel, and gas by more than 50 per cent.
Promising to shield working people in Britain from the impacts of the conflict, the PM will say: “It’s moments like this that tell you what a government is about. My answer is clear: whatever challenges lie ahead, this government will always support working people.
“That is my first instinct – my first priority – to help you with the cost of living through this crisis.”
In a change from the tone adopted thus far, the prime minister will also threaten energy firms with legal action following claims that heating-oil suppliers are cancelling orders and jacking up prices in an attempt to take advantage of the crisis.
Addressing those concerns, he will say: “I will not tolerate companies trying to exploit this crisis to make money from working people … If the companies have broken the law, there will be legal action.”
Gas and electricity bills are covered by the regulator Ofgem’s price cap, which is fixed until June, but if the conflict continues and Iran maintains its stranglehold on shipping in the Strait of Hormuz, then households could face dramatic hikes at that point.
Meanwhile, around 1.5 million households that rely on heating oil, mainly in rural areas, are already facing soaring costs, with the price per litre rocketing since the start of the crisis from around 62p a litre to as much as £1.73.
One consumer told the BBC they had been quoted £315 for 500 litres of oil, but within two or three days of the conflict breaking out, the quote went up to £653.
The chancellor is expected to set out the full details of the package of support for those reliant on heating oil this week. The Financial Times reported that the package will be worth £50mn and impact around 1 million households, mainly in rural areas.
It comes after the chancellor and the energy secretary put fuel providers on notice, meeting with them over the weekend to warn against profiteering from the Iran war.
Ahead of the talks, Rachel Reeves wrote to the Competition and Markets Authority (CMA), asking it to stay on “high alert” for “unjustifiable” price hikes, and insisted she would “not tolerate” firms exploiting uncertainty in the Middle East for financial gain, as concerns grow over the impact of the war on the cost of living.
The Treasury is also thought to be considering other forms of support for those reliant on gas and electricity, in case prices are still high when the price cap lifts in June.
Analysts at Cornwall Insight have forecast that household energy bills could rise by 10 per cent from July following sharp increases in wholesale gas prices.
This would mean Ofgem’s price cap for July to September surging to £1,801 a year for a typical dual-fuel household – an increase of £160, or 10 per cent on April’s cap.
“We’ve got some time, and we are working through in the Iran response board [a group of Treasury ministers and officials] different approaches that we could take, including looking at more targeted options,” the chancellor told The Times over the weekend.
“We are working through different scenarios at the moment, and I don’t want to suggest that we’re going to do something that we know we’re not able to deliver. I am concerned, given how high our debt is, the debt that we inherited, and so I want to look at what the different options available would be.”
Ms Reeves played down the prospect of a blanket energy bailout for households, as happened in the wake of Russia’s invasion of Ukraine at the cost of around £35bn over a six-month period.
“It is important, even when there is an economic shock – or perhaps particularly when there’s an economic shock – that you continue to be disciplined about your use of public money,” she said.
The prime minister will also use Monday’s address to insist that de-escalation in the Middle East is the best way to protect household finances, saying: “We will continue to work towards a swift resolution of the situation in the Middle East. Because there is no question that ending the war is the quickest way to reduce the cost of living.”
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