Rachel Reeves boasted she is helping ‘working people’ with the energy crisis today – as she prepares to subsidise bills for millions of benefits claimants.
The Chancellor has made clear any bailout for the Middle East chaos will be targeted, insisting she cannot afford to prop up the ‘wealthy’.
But the Treasury is not thought to be able to target specific incomes, meaning that support is expected to go to around six million people on handouts such as universal credit and pension credit.
The stance has caused anger that middle-income households will face even more pain, with the tax burden already on track to hit a record high.
Labour MPs have forced the Government to drop efforts to curb the spiralling welfare bill.
Responding to figures this morning showing inflation running at 3 per cent even before the Iran war started, Ms Reeves said: ‘In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.
‘We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs.
‘We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.’
In a Commons statement yesterday, Ms Reeves said the universal support for energy bills under the Tories in 2022 was a ‘mistake’ because much of the £40billion went to the ‘wealthiest’.
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.
Ms Reeves played down the prospect of increasing government borrowing to pay for any bailout, saying she would not break her ‘ironclad’ fiscal rules.
That prompted concern that taxes would need to go up again on the rest of the population to meet the costs.
Around six million families already receive £150 off their bills via the Warm Home Discount, which was expanded last year. The scheme is funded by a levy on the bills of others, averaging around £40 a year.
Expanding the scheme further is among the options being considered by the Treasury as it draws up plans for an energy support scheme this winter.
Other options include a subsidised ‘social tariff’, put forward by the Resolution Foundation, which would require about £4billion a year in taxpayer support.
Many people on universal credit work but have their incomes topped up.
At PMQs in the Commons this lunchtime, Kemi Badenoch said Labour was now ‘just the welfare party’.
‘Families and businesses will suffer from the spike in energy costs because of his decisions, he could abolish the green taxes on their bills, he could stop the fuel duty rise, we could drill our own gas in the North Sea,’ the Tory leader said.
‘What is he doing? He is planning another giveaway to people on welfare. Yet again, he is taking money from those who do work to give to those who don’t.
‘First we had the budget for Benefit Street. Now it’s the bailout for Benefit Street. Doesn’t this just prove that they’ve given up being the Labour Party and they’re now just the welfare party?’
Sir Keir replied: ‘She talks about the spike in energy prices that’s because of the war, which I say we shouldn’t join, and she says we should join without following through on the consequences.
‘And time and time again, she gets the big calls absolutely wrong.
‘She wanted to drag us into the war. She got that wrong. She opposed taking control of energy security, and she got that wrong. She opposed our decision to cut energy bills, and she got that wrong, and she seriously thinks that will make her relevant, and she’s got that wrong.’
The Conservatives have also pointed out that Sir Keir and Ms Reeves backed the universal package four years ago.
Asked during a round of broadcast interviews this morning whether ‘targeted support’ meant more pain for the middle class, Health Secretary Wes Streeting said: ‘Or put a different way, I will be feeling, as a higher earner in this country, a difference in my living costs.
‘Will they be pinching me in the pockets in the same way that they might impact on my mum, who is a cleaner on the minimum wage? No.’
Pressed on BBC Radio 4’s Today programme whether that was fair, he said: ‘Look, we know that the public finances are in a precarious situation. That’s what we inherited.
‘We know that the economy has had to go through a huge amount of strain over the last decade, partly as a result of things like the pandemic, partly as a result of reckless political choices like Liz Truss’s mini-budget, and the challenge the Chancellor has is, she’s got to try and drive improvement in the economy, confronting the world as it is, not as we would wish it to be.’
Analysts Cornwall Insight have forecast that the energy price cap could jump by £332 in the summer.
The RAC said the average pump price for diesel was now 173.83p a litre yesterday, up 3p on Monday and 31.5p since Donald Trump launched the war on Iran.
Meanwhile, petrol has risen by 15.7p to 148.55p a litre over the same period.
The motoring firm said diesel was on track to be 180p a litre by next week. That would take the cost of filling a family car close to £100, while 150p a litre petrol would leaving people paying £82.50 a tank.
The Institute for Grocery says food inflation could hit 8 per cent by the summer, piling pressure on family budgets.
A rise on that scale could add almost £500 to the average household grocery bill if it was sustained for a year.
