How and by how much will Rishi Sunak cut £700 rise in energy bills?

Rishi Sunak. Credit: PA

The Chancellor is tomorrow set to unveil a set of loans, subsidies and rebates to reduce the impact of the expected £700 increase in typical household energy bills that will bite from April.

He’ll do so at around 11am, to coincide with the Ofgem announcement of new price cap.

I’ve said for a while, the cap is set to rise from just under £1,300 to around £2,000 - which would be totally unaffordable for hundreds of thousands of low-income households.

The Times says today Mr Sunak’s package will include some kind of loan scheme to energy companies to help them reduce (though not eliminate) the immediate price increase, by deferring some of the price rise for consumers to future years.

What is unclear is the mechanism for repaying that multi-billion-pound loan and whether it is at all linked to future movements in the wholesale gas price. So, one big question is the degree of risk and therefore implicit subsidy being shouldered by the Treasury and taxpayer.

Robert Peston explains what he has found out about the measures

Kwasi Kwarteng insisted on the Peston show last week there would be no subsidy or bailout for the energy companies themselves. We’ll see whether Mr Sunak has held the line on that. Separately there will be additional targeted help for poorer households.

There’s been speculation that would be via council tax subsidies for those in lower value houses. But, again, there is no clarity how that would help the millions in rented homes.

Finally, there is the question of how this package will be funded, and whether Mr Sunak has rejected the Labour proposal of a windfall tax on energy producers (as opposed to suppliers).

All of this represents a huge test of the rationality and effectiveness of a government and a prime minister battered by the partygate storm - and of a chancellor with ambitions to succeed Johnson.