Ministers are set to announce new plans to ease pressure on living costs in the coming weeks – with households awaiting the final verdict on how much more they have to pay for energy.
The regulator Ofgem will announce an increase in the fuel price cap on February 7 – which is expected to be as high as 50 percent – to take effect in early April. The government hopes to have a range of measures to help households ready by that time.
Chancellor Rishi Sunak is under pressure to commit to additional funding and has been warned about it if he does not act, inflation will rise and the cost of servicing government debt will increase.
On Tuesday, Labor will challenge Conservative MPs to support the removal of VAT from energy bills with a legally binding Commons vote on the issue.
Prime Minister Boris Johnson has held a number of meetings with Mr Sunak and Minister of Trade and Industry Kwasi Kwarteng, whose task includes energy and industry strategy. Labor and Retirement Secretary Therese Coffey is also involved in talks on how to use the unemployment benefit system to help the poorest Britons in the coming months.
The Prime Minister said: “I understand how difficult it is for people, I understand the pressure that people are facing on the household economy. This is the result of global price increases as a result of the economy returning from Covid. But it makes life very hard.”
A senior Downing Street source said: “There is a recognition that we need to move forward with this, but we are not setting a deadline.”
However, many officials want the support package ready when Ofgem sets the new level of the energy price cap in four weeks.
Sir. Sunak is seen as a possible obstacle due to his reluctance to increase state borrowing. He has already ruled out the idea of canceling the new one health and social security tax which will enter into force in April at the same time as energy prices rise.
A Whitehall source warned: “The chancellor needs to realize that this is a macroeconomic issue. If the energy bill goes up, inflation goes up again and the cost of servicing debt becomes more expensive.”
The lower house will vote on a proposal put forward by Labor, which will lead to VAT on energy being scrapped.
Shadow Climate Change Secretary Ed Miliband said: “The government – and all Tory MPs who have previously supported a VAT cut on home energy bills – should follow through on their promises and vote with Labor today to scrap the tax for a year, so hard-working people is facing a growing cost of living crisis. “
The controversy over the cost of living comes when one of the most influential conservatives challenged Mr Johnson to live up to his promises of equalization.
Ben Houchen, the mayor of the Tees Valley, said voters needed “concrete evidence that they had the right to support this government” in the next election.