Ministers are discussing potential intervention to protect households from soaring energy bills if the Middle East conflict persists, amid fears that a 10% rise in the price cap could add £160 to annual bills from July. Oil and gas prices have surged following US bombing campaigns against Iran and Tehran's closure of the Strait of Hormuz, threatening the government's claim to have lowered costs.
Energy Secretary Ed Miliband is said to believe that substantial price increases cannot be allowed just as the government touts reductions from last year's budget. A source at the energy department stated: 'Driving down bills is one of our core cost-of-living messages. We can’t allow them to go back up, even if it involves more support for households.' Another minister warned: 'That can’t happen.'
Treasury sources described any mitigation discussion as premature but acknowledged it would be necessary if the conflict drags on. Analysis by the Resolution Foundation suggests an energy shock could wipe out expected living standard gains this year. Chancellor Rachel Reeves pledged in her spring forecast to 'protect families from the turbulence beyond our borders.'
Energy providers have already begun altering fixed-price tariffs, with MoneySuperMarket reporting 57 tariffs removed or updated in 72 hours. One frontbench MP argued: 'If we can suddenly find £10bn because the OBR changed their mind, we can find £10bn to get people’s bills down today.' Another junior minister noted that even Liz Truss did not allow households to absorb such costs.
However, experts warn against a blanket rescue package like Truss's £30bn scheme. Helen Miller of the Institute for Fiscal Studies urged targeted help, while the Resolution Foundation renewed calls for a social tariff for the poorest. Labour MP Graeme Downie stressed the need to blame Iranian actions and prepare to intervene, saying: 'Unless we firmly point the finger... there is a risk the public turn on the government.'
Sam Alvis of IPPR outlined three options: increasing benefits, cutting energy levies, or expanding the Warm Home Discount. He argued that given energy prices' direct impact on inflation and cost of living, 'there are few more important ways to spend spare fiscal space now.'
