Middle class households may not receive additional assistance with rising energy bills as Chancellor John Healey considers 'targeted' support. Concerns are growing that turmoil in the Middle East could lead to a 25% increase in the energy price cap in the New Year, resulting in higher costs for families. Healey is reportedly evaluating options to alleviate the financial burden, but support is expected to focus on low-income households.
One potential measure includes expanding the warm home discount, which currently provides £150 off energy bills for households receiving means-tested benefits. The Government has temporarily reduced VAT on electricity bills by 5% until March; however, this reduction has been offset by rising prices. Extending this measure could strain resources as Healey faces pressure to manage the budget, with speculation of tax increases in the fiscal package scheduled for October 28.
A Government source stated, 'We will step in where we can but we also need to be honest that we are not going to be able to solve this entirely. It is a deeply challenging situation.' The Chancellor is under pressure to balance the Government's finances, with fears of a potential 'wealth tax' on capital gains and an increased 'mansion tax' being considered to raise revenue.
The situation is compounded by high diesel prices and the Bank of England's potential interest rate hike. Labour MPs are opposing calls from the Conservative party for cuts to benefits spending. Reports indicate that Healey may allow the Government's financial 'headroom' to decrease to reduce the amount of funds he needs to secure, which could lead to increased borrowing costs.
Andrew Griffith, the Tory shadow chancellor, criticized Healey's approach, stating, 'Just like Rachel Reeves, John Healey is trying to fudge the figures rather than cut out-of-control welfare and wasteful spending. Labour are asking us all to take a chance with Britain’s public finances, risking market chaos and higher mortgage rates in the process.'