Boris Johnson has not ruled out acting to help cut energy bills for the poorest households, but seemed to stop cutting VAT on consumer gas and electricity.
Households are facing drastic rises in gas and electricity prices from April, with the legal ceiling on domestic energy prices set to rise, allowing companies to pass on some of the pain of soaring wholesale prices seen in recent months to consumers.
Bills could rise from £ 1,277 a year below the current price cap to £ 1,865 a year, an increase of 50 per cent according to estimates – although the level of the cap will be completed by regulator Ofgem next month.
The Prime Minister comes under increasing pressure from its own backers to provide support to consumers who will be affected by the changes, amid growing fears of a looming cost of living crisis.
In particular, Tory MPs want to see Mr Johnson do well after a claim he made ahead of 2016 EU referendum, as he said leaving the bloc would allow Britain to cut VAT on energy bills and cut costs for businesses and consumers.
But speaking at a Downing Street news conference on Tuesday, Mr Johnson questioned the effectiveness of such a move, suggesting that further measures to address rising costs could be just around the corner.
Johnson said he “does not rule out further action”, adding that the potential was there “in the freedom to regulate our own VAT”.
But he continued: “The argument is that it’s a bit of a blunt instrument, and the difficulty is that you end up cutting back on the fuel bill for a lot of people who may not need the support in the very direct way that we have to give it … We need to help people who are most in fuel poverty. ”
Johnson said he appreciated the “difficulties people are facing due to rising gas prices”, adding that he would “continue to listen to businesses and consumers on how to reduce energy costs”.
His comments came after his official spokesman distanced himself from the government from the proposal that removing VAT from domestic fuel bills would reduce household costs.
“Of course we will consider all policy proposals, but moving forward would not guarantee that prices will fall, given that price increases are driven by a number of factors that we see unfolding around the world,” the official spokesman said.
Number 10 also defended the use of green taxes on renewable energy bills.
“The exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-made renewable energy sector to further reduce our dependence on fossil fuels,” the spokesman added.