Sunak pledges boost for energy support package

Rishi Sunak has pledged to provide extra support for households with their energy bills this winter if he wins the Conservative leadership contest.

The former chancellor of the exchequer, who is lagging behind his opponent Liz Truss in the two-horse race amongst Tory party members, has announced that he will offer the additional support if he wins the contest to become prime minister.

In a statement issued on Monday night (8 August), Sunak said he would expand the bills support framework that he established earlier this year when chancellor.

The extra cash would be funded via government efficiency savings, said Sunak, whose pledge follows comments by Truss in an interview last week rejecting “handouts” for cash-strapped energy customers.

On Tuesday, the foreign secretary reiterated that she would focus on supporting households by cutting taxes and getting rid of environmental levies on bills.

Truss’ supporters have reportedly accused Sunak, who has already pledged to cut VAT on energy bills, of performing a U-turn over his commitment to restrain public spending by promising extra support for customers.

Sunak’s allies have hit back by claiming that the foreign secretary’s stance shows that she is “divorced” from the “reality” of spiralling bills faced by many households.

Meanwhile, former energy and climate change secretary Sir Ed Davey has called for the government to cancel this winter’s price cap increase and absorb the cost itself.

This sum, which the Liberal Democrat leader estimated could be as much as £36 billion, would be paid for by expanding the government’s existing energy windfall tax and from the higher VAT receipts that the government is collecting thanks to inflation, he said.

Sunak’s pledge follows Monday’s publication of Cornwall Insight’s latest price cap forecasts, which predicted it will peak at the equivalent of £4,427 per annum next April.

In the meantime, the consultancy forecast that the price cap will rise from its current level of £1,971 to £3,582 when it is next adjusted at the start of October – around £200 higher than its previous prediction – before climbing to £4,266 when it receives its first quarterly update in January.

Cornwall was updating its forecasts after Ofgem confirmed its decisions to begin updating the price cap every three months, rather than every six, and introduce a new allowance for exceptional backwardation costs. The regulator said it expects the allowance to enable suppliers to collect an £271 per customer between October and March.

Good Energy chief executive Nigel Pocklington said the latest forecasts mean that poorer households face a a gap in support of up to £1,000, even taking into account the assistance already offered by Sunak earlier this year.

He said: “The two candidates for prime minister are squabbling over fringe measures that don’t begin to tackle the issue. VAT cuts will save 5% and a moratorium on social and policy costs even less.

“Tax and National Insurance cuts won’t bridge the gap for poorer households. To avoid the economic and social harm that will come with these rising bills, and to help people plan how they are going to get through the winter, we need to be clear on our plan by the time the new cap is announced.

“If we don’t see significant action to help people and businesses before the winter then the cost-of-living crisis will be compounded further. And whoever is in number 10 come December will be wishing something had been done sooner.”

Morgan Wild, head of policy for Citizens Advice, said: “The government did the right thing by bringing in targeted support, but it won’t be enough for people to manage these previously unthinkable price hikes. The obvious place to start is to increase benefits to keep pace with the cost of living. There’s no time to waste.”

The future of the price cap will be one of the themes discussed at the Utility Week Forum on 8-9 November in London. Find out more here.