Middle-income families ‘WON’T get help with energy bills’

Rachel Reeves was accused of punishing middle-income families today as she made clear only benefits claimants will get government help with soaring energy bills. 

The Chancellor made clear that any bailout will be targeted rather than universal as she responds to the Middle East crisis.

In a Commons statement this lunchtime, Ms Reeves said the 2022 support under the Tories was a ‘mistake’ because much of the £40billion went to the ‘wealthy’. 

She said she would focus funds on ‘those that need it most’. Ms Reeves also outlined plans to prevent price ‘gouging’ during what she admitted would be a ‘significant’ cost-of-living storm.

But Kemi Badenoch accused Ms Reeves of raising eye-watering levels of tax that is only spent on benefits claimants. The Conservatives also pointed out that Keir Starmer backed the universal package four years ago.

Markets gave a jittery reaction to the Treasury’s stance, with interest rates on 10-year gilts – one of the main ways the Government raises money – increasing sharply. 

Brits are facing an agonising squeeze on living standards despite Donald Trump declaring he is looking for a way to end the US-Israeli war on Iran.

The PM yesterday braced the UK for the turmoil to continue for ‘some time’ – suggesting the closure of the crucial Strait of Hormuz and damage to infrastructure could still be resonating by Christmas.

He also highlighted the strain on the public finances, with fears the ‘Trumpflation’ shock will drive up spending and borrowing costs.  

Domestic energy bills are capped until July, but experts say they could rise by a fifth or more – putting Ms Reeves under pressure to come up with a support package.

Fuel duty is due to rise in September, even though drivers are currently being hit with eye-watering pump prices. 

Food bills are also being closely watched with fertiliser costs spiking because much of the world’s supply comes from the Middle East. 

Ms Reeves told MPs: ‘Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.

‘This is not a war that we started, nor is it a war that we joined… but it is a war that will have an impact on our country.

‘The challenges may be significant but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest.’

The Chancellor said: ‘The previous government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss. That gave the support to the most wealthiest of households.

Ms Reeves added: ‘That left us with high levels of national debt, a cheque written then for a bill that is still being paid today.

‘I can confirm to the House that contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our ironclad fiscal rules to keep inflation and interest rates as low as possible.’

Ms Reeves said in 2022 there had been a ‘binary’ choice between offering universal support or no support. 

That was because the then-government did not have adequate data on household incomes, a situation which she argued had now been fixed.  

Despite Ms Reeves having pushed the tax burden towards a record high since entering No11, figures last week revealed the public sector racked up the highest February borrowing on record outside of Covid – far more than analysts had expected.

There are concerns that the Government will need to bring in even more revenue to cover a shortfall in the finances from the Middle East turmoil. 

The Chancellor has acknowledged she needs to be ‘disciplined’ on spending, with suggestions that poorer households on benefits will be prioritised.   

Tory leader Ms Badenoch said: ‘What we see with targeted support is taxes on other people to pay for support to others. This is Labour’s playbook.

‘They keep raising taxes on everyone else to give benefits. There is a much better thing that they could do, which is to scrap the taxes on household energy bills.

‘These are the green taxes which Ed Miliband put on all our energy bills, both households and business and industry.’

She added: ‘The other thing she could do is scrap her planned rise on fuel duty, which is coming in in a few months.

‘It’s completely crazy to be increasing fuel duty at this time, and let’s drill our own oil and gas in the North Sea.’

Ms Reeves made her statement to MPs following an emergency Cobra meeting yesterday.

Her announcements included an ‘anti-profiteering framework’ to detect and crack down on companies exploiting the Middle East crisis.

The Competition and Markets Authority is set to be given ‘more teeth’ to root out price gouging.

But Ms Reeves batted away pleas for Labour to scrap its opposition to new oil and gas exploration in the North Sea. The industry and even renewables groups have pointed out that the UK importing more fossil fuels does not help the global push towards Net Zero. 

The Chancellor argued that Britain needs a diverse mix of energy to shield the public from volatile oil and gas markets, vowing to boost nuclear power supplies.

She said she is exploring government-backed indemnities for critical energy security projects so construction can continue if a project is legally challenged.

Susannah Streeter of Wealth Club said: ‘As another cost-of-living crisis looms, blanket help to bring down energy costs simply doesn’t look viable given the stretched public finances and it’s likely lower-income groups will be first in line.

‘The Government for now appears to be resisting calls for more North Sea drilling and doubling down on its strategy to cut the dependence on fossil fuels.’

Mr Shanks also tried to cool concerns about the need for rationing, with the International Energy Agency having suggested people drive less and more slowly.  

Asked on Times Radio if drivers should change their habits, the minister said: ‘They should do everything as absolutely normal because there is no shortage of fuel anywhere in the country at the moment. We monitor this every single day, I look at the numbers personally. There’s no issue at all with that.’

Mr Shanks added: ‘People should go about their business as normal. That’s what the RAC and the AA have said. It’s really important people do that.

‘There’s no shortage of fuel and everything is working as normal.’

Lib Dem leader Ed Davey said: ‘There definitely needs to be something targeted because there are people who are really struggling already with energy bills, let alone before these rises caused by Trump’s illegal war.

‘But I am worried that the Government isn’t thinking about people on middle incomes and modest incomes, for whom a £500 rise in energy bills – which is what’s being talked about – on top of the rise in mortgage costs, on top of the rise in petrol and diesel prices, on top of the cost-of-living crisis that was already there, those people will really be hammered.

‘So the Government’s got to think more widely. Yet no one wants the richest people to get money that they need, and that was a big mistake of Liz Truss, who wasted a lot of money.

‘So we’ve got to get it right. But I’m worried the Government is not thinking about people who will struggle to pay an extra £500.’