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Rishi Sunak £10bn support package to cut energy bills by up to £400

Pedro Goncalves
26 May 2022, 8:53 am

With energy bills set to soar again this autumn the Chancellor will intervene and announce additional measures. Photo: PA

Chancellor Rishi Sunak is expected to announce new measures aimed at easing the cost of living crisis that will give households hundreds of pounds off their energy bills ahead of another jump in the price cap to £2,800 in October.

According to reports, he chancellor is expected to tell MPs on Thursday that he will ditch the previously announced £200 loan on energy bills and replace it with a grant that will not have to be paid back. This discount could be increased to as much as £400.


Energy bills are set to soar again. Chart: Yahoo UK
The announcement is expected to benefit more than 27 million households who will not be expected to repay any loan element of the savings on their energy bills.

Details are expected to be revealed in the Commons this Thursday morning and additional help for those on the lowest incomes is also expected.

Read more: UK energy price cap expected to rise to £2,800 in October, says Ofgem boss

Options that have been discussed include a further increase to the warm homes discount to help low-income households cope with rising energy bills.

Other measures discussed include increasing the winter fuel allowance, a further council tax cut or a VAT cut.

A council tax rebate is also set to be included but proposals to slash the 5% VAT on energy bills have been ditched.


Paul Johnson, director of the IFS, said further support should be offered to the poorest households as energy bills surge.

But he told BBC Radio 4: “I do think we need to be careful… Putting tens of billions into the economy at a time of high inflation could stoke additional demand and make the inflation much more permanent in the economy.”

The £10bn support package will be funded through a windfall tax on the profits of oil and gas companies, set to come into effect in the autumn.

Earlier this week the UK's energy regulator Ofgem said the typical household energy bill was set to rise by £800 in October, bringing the typical household bill to £2,800 a year. Bills had already risen on average by £700 in April.

Read more: 2 million pensioners face poverty amid spiralling energy bills, warns Age UK

Ofgem warned it meant 12 million households could be placed into fuel poverty.

Most people living in homes in England in council tax bands A-D have already received a £150 rebate on their bills.

The announcement comes a day after Sue Gray's report on lockdown-breaking parties in Downing Street was published, prompting critics to accuse the government of bringing forward the measures to distract from the fallout.