The paper, looking at the options for Liz Truss or Rishi Sunak in No 10, also warned that the government should plan for sustained rises in energy bills by going much further than making public appeals to use less gas – for example by telling consumers about cost savings from turning off thermostats – and a commitment to building more energy-efficient homes to protect consumers. No 10 and Kwasi Kwarteng, the business secretary and a close Truss ally, are resisting calls for the public to use less energy. But the next prime minister, likely to be Truss, faces some very tough choices when he takes office about how far to subsidize energy bills. Boris Johnson’s government has already spent £33bn to cover 90% of the then-forecast increase in energy bills, but the surge in prices means a further £23bn will be needed to cover average bills forecast to be 900 £ more per household than predicted just three months ago, according to the IfG. It found that extending this kind of help in 2023/24 could cost the new government more than £90bn to be as generous to households again next year. Another option that could be considered for a new prime minister is to insulate only the most vulnerable from higher bills. The IfG found that offsetting increases in energy bills for those on means-tested benefits would cost £800 to £900 per household, or around £6bn to £8bn in total, while extending more help to those on disability benefit and pensioners could take the total cost of support for the most vulnerable at £10 to £12bn. The IfG found that Labour’s proposed plan to keep the cap at the current £1,971 a year would cost the government more than £40bn over six months and would also be difficult to overturn. The total cost of aid would require massive borrowing, but still just short of the £300bn spent during the Covid pandemic. Olly Bartrum, senior economist at the IfG and one of the authors of the report, said: “Energy prices have risen sharply again in recent weeks and are now expected to remain higher for longer than previously expected. Deciding whether and how to help households and businesses with these costs will be one of the most urgent tasks facing the new government. Archie Bland and Nimo Omer take you to the top stories and what they mean, free every weekday morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. “This could require significant additional spending this winter and even more next year – even cutting aid to the most vulnerable could cost several billion pounds. The government should also do more to encourage greater energy efficiency and reform energy markets to reduce vulnerability to high energy prices if it is to avoid further expensive support packages in the future likely to be driven by highly volatile energy prices.” . Truss has softened her stance on what she called “handouts” to cover the cost of energy, but hinted that help could go to the most vulnerable.
