UK households need to start looking at how they are using energy, the chancellor has suggested, amid calls for urgent government intervention to tackle soaring bills.
It comes as outgoing Prime Minister Boris Johnson predicted a “tough” few months ahead – but promised energy prices will eventually come down amid grim predictions about the impact the 80.06% rise in the energy price cap will have on millions of the poorest households across the UK.
Chancellor Nadhim Zahawi stressed on Friday that the government is not paralysed by the Tory leadership contest and is focussed on preparing options for whichever candidate emerges as the winner.
The chancellor told broadcasters that help from the government is coming, but admitted: “We know that’s not enough. We’ve got to do more.
“We need to make sure that this isn’t a sticking plaster, that for the long term we continue to help the most vulnerable who have no cushion, and that’s what I’m determined to do."
He said the treasury is working on options for households and businesses ready for when the new PM starts.
“So my message today is, ‘We’ll get this £37 billion to people to help them for now, and then more will be coming because we know this will continue in January and, of course, on to April and next year and we have to remain resilient’," he said.
But Mr Zahawi also acknowledged that it is perhaps now the time to give greater heed to how we use energy.
“The reality is that we should all look at our energy consumption. It is a difficult time. There is war on our continent," he said.
“Very few people anticipated war. Wars happen in far-flung places. It is now here with us. We have to remain resilient. My responsibility is to deliver that help.”
Mr Johnson, entering his final few days in office, also said the government has a “big, big package of help and support” and that the “extra cash” will come in September.
“There’s a pipeline of cash coming through over the next few months and through the autumn and the winter. But that is clearly now going to be augmented, increased, by extra cash that the government is plainly going to be announcing in September,” he told broadcasters.
“This will go on for a few months and it will go on over the winter.
“And it will be tough – and I’d be very clear about that – but in the end, we are also putting in the measures we need to ensure that we have the energy independence to get through this.”
Mr Johnson has been accused of presiding over a “zombie government” in recent weeks, with the promise of fresh government help on energy bills delayed until a new prime minister takes office at the start of September.
He said the UK needs to get through the global spike in energy caused by the war in Ukraine and Russian President Vladimir “Putin’s ability to blackmail”.
Opposition politicians, industry regulator Ofgem and campaigners were all united on Friday in calling on the government to intervene urgently, as charities warned that households across the country could be plunged into poverty by the soaring energy bills.
The Institute for Fiscal Studies (IFS) suggested that whoever becomes the next prime minister will be unable to avoid putting together a “substantial package of support”.
The new rise in the price cap, the IFS said, means current government support will only cover 47% of the rise in bills.
It said covering the same proportion of the energy price rise now would cost a further £14 billion.
The IFS said it is difficult to assess the impact of Ms Truss’s plans to cut green levies.
“Cutting only those levies that still add to bills would be complex as they are linked to various schemes and subsidies and apply to business as well as households, but would save households around £50 on average over the three months from October,” the think tank said.
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Rishi Sunak’s plan to cut VAT on household energy bills, the IFS said, would save a typical household £51 between October and December at a cost of £1.4 billion.
“Looking beyond this winter, energy prices also look like they will remain very high well into next year, which will put pressure on the Government to provide further support in the coming months,” IFS economist Isaac Delestre said.
“Whoever becomes the next prime minister will most likely be announcing a substantial package of support very soon after taking office.”
The Resolution Foundation think tank said the country is facing a “winter catastrophe” unless the government provides extra support.
It said any extra support needs to target those who need help most, while also reflecting households’ differing level of energy usage and stretching beyond simply the benefit system.
Currently, none of the proposals from leadership candidates or opposition parties pass such a test, it added.
The proposals put forward by frontrunner Ms Truss and rival Mr Sunak have both been criticised for failing to meet the scale of the challenge, with the foreign secretary promising an emergency budget to address the cost-of-living crisis if she enters Number 10.
A spokesman for Ms Truss said on Friday that as prime minister she would “ensure people get the support needed to get through these tough times”.
Mr Sunak also told broadcasters that protecting people from rising energy bills would be his “immediate priority” as prime minister.
Jonathan Brearley, Ofgem’s chief executive, early on Friday said the problem is beyond what the regulator can address by itself.
Appearing on BBC Radio 4’s Today programme only minutes after the price cap announcement, he accepted the news would be “devastating” for many families.
“The truth is this is beyond the capacity of the regulator and the industry to address. So what we are saying today is, ‘Look, we have 10 days now until we have a new administration, have a new prime minister and a new ministerial team’.
“What I am clear about is the prime minister with his or her ministerial team will need to act urgently and decisively to address this.”