The government plans to help “those who need it most” if energy bills spiral due to the US-Israel war with Iran.
Chancellor Rachel Reeves said contingency planning was under way for “every eventuality”, noting the full impact of the war on the UK economy was uncertain.
Energy bills for millions of people in England, Scotland, and Wales are about to fall for three months from April under Ofgem’s price cap, which is updated quarterly, but there is likely to be a big jump in gas and electricity costs over the summer.
This has prompted calls for the government to step in, though the Conservatives have questioned whether the government can afford to do so.
A fifth of the world’s oil and liquefied natural gas usually moves through the Strait of Hormuz, which has been effectively blocked since the conflict began.
Wholesale oil and gas prices have soared as the war has entered its fourth week which experts fear will feed through to energy prices.
Detail of exactly who could be helped by the UK government and how remains unclear.
Reeves said any package would be constrained by the government’s borrowing rules and its wish to keep inflation and interest rates “as low as possible”.
“Contingency planning is taking place for every eventuality so we can keep costs down for everyone and provide support for those who need it most,” she said.
The chancellor’s comments signal that the public should not expect support for everybody.
They suggest any package of support will not apply to the richest households, in contrast to the Energy Price Guarantee that was rolled out universally after Russia’s full-scale invasion of Ukraine in 2022.
The Treasury has calculated that the top 10% richest households, as users of the most amount of gas, got the biggest support, averaging £1,350.
Reeves said the government was working with the Department for Work and Pensions to ensure support goes to those most in need.
Shadow Chancellor Sir Mel Stride accused Reeves of leaving the UK economy “in tatters”.
“We are getting poorer and our economy is increasingly fragile,” he said.
On the targeted help Reeves mentioned, he asked: “What fiscal capacity does she believe she has to support those in need?”
The chancellor also announced a “new anti-profiteering framework” for the Competition and Markets Authority, which she says will have powers to tackle any companies that exploit price rises.
Companies which breach competition or consumer law, including through excessive pricing or by charging customers a higher price than advertised when they come to order, may be fined by the CMA.
The price of petrol has reached an 18-month high since the Middle East conflict broke out, according to the RAC. Petrol retailers have strongly denied price-gouging, and earlier this month criticised the government for using “inflammatory language”.
The watchdog is currently gathering evidence on whether fuel providers are profiteering, and it will be some time before it comes to a conclusion.
Meanwhile, fuel duty is set to increase in September, having been cut by 5p and frozen since the price spike following Russia’s invasion of Ukraine.
However, earlier this month the government said the planned rise would be kept under review as the Middle East conflict continues.
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