The government has announced it will keep its cap on energy prices for a further three months as part of Jeremy Hunt’s first full budget.
The Energy Price Guarantee (EPG) – which limits the unit cost of gas and electricity that people pay – had been expected to rise to £3,000 next month, meaning another hike in household bills.
But just hours before the chancellor was due to deliver his statement to Parliament, the Treasury confirmed the figure would now remain at £2,500 until June, saying the typical home would save £160 on energy bills as a result.
Hunt extends energy price cap as budget measures revealed early
Prime Minister Rishi Sunak said the extension of the EPG – which is thought will cost £3bn – would “give people some peace of mind”.
Mr Hunt added: “With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
However, the energy bills support scheme, which saw households getting around £66 taken off their bills each month, will still come to an end in March.
Labour’s shadow chief secretary to the Treasury, Pat McFadden, welcomed the announcement, saying his party had been calling for it for some time.
“I don’t mind if we lead the way as long as they do the right thing,” he told Sky News. “And I think it’s important to do that because the cost of living crisis has not gone away.
“People are really struggling to pay their bills and as things stood, those bills were scheduled to go up another £500 a year in a couple of weeks time, so I think it’s right to extend that guarantee.”
What to look out for in Hunt’s first budget
But the SNP’s economy spokesman, Stewart Hosie, said the policies did not go far enough, calling the chancellor “truly pathetic” for not keeping the energy bills support scheme.
“With energy companies making record profits, and the wholesale price of gas falling, there is no excuse for this shameful Tory decision, which will hammer household incomes and push even more families into poverty, hardship and debt,” he added.
The Liberal Democrats echoed his criticism with a call for further bill cuts, with their economic spokeswoman, Sarah Olney, saying: “Instead of a sticking plaster for another three months, we need meaningful action now.”
The move is the latest early reveal from Mr Hunt’s budget, with the chancellor expected to detail his plans in full from 12.30pm – after Prime Minister’s Questions.
Sky News also understands he will promise to provide 30 hours of childcare a week to parents of one and two-year-olds – at a cost of £4bn for the Treasury – and give a further cash injection to the sector to increase the availability of existing free childcare for three to four-year-olds.
But Labour MP Stella Creasy said the policy was “economically illiterate” as it would “stoke up demand without producing the supply“.
She told Sky News: “I welcome the fact that childcare now on the political agenda.
“But I really worry this announcement, if it’s not backed up with the money needed to actually properly fund these places and properly expand the places – bear in mind that half of local authorities tell us they don’t have the places they need at the moment to meet demand – then this government could end up crashing the childcare system just as they crashed the economy.”
Plans are also being considered to loosen staff-to-child ratios for two-year-olds, which could make the cost of childcare a little cheaper – though some in the sector have warned against it, saying it could undermine the quality of care.
Ms Creasy said: “I would love to have a conversation with the chancellor after he spent a day looking after five two-year-olds on his own all day, because I think most parents and indeed most providers wouldn’t think that was a good idea.”
The policies fit into what is expected to be the wider theme of the budget – encouraging people back to work.
In that vein, Mr Hunt is expected to raise the lifetime allowance for pension savings from £1m to £1.8m – a record level – and could also lift the annual tax-free allowance for pensions from £40,000 to £60,000 to incentivise professionals out of retirement.
There could also be changes to aid long-term sick, disabled people and benefit claimants to return to work.
But there could be upset from some of his own backbenchers as the chancellor is not expected to meet Tory demands for tax cuts, and will keep the planned rise in corporation tax from 19p to 25p.
However, former Conservative chancellor Lord Lamont warned against a rebellion, saying Mr Hunt had “done a good job” to “restore confidence” in the economy after Liz Truss’ disastrous mini-budget last year that sent the markets into turmoil.
He told Sky News: “I think it’s very important that that is not disturbed by people being unhappy about no tax cuts today.
“I don’t think there are going to be tax cuts today. I don’t think there should be tax cuts today. I don’t think you’re going to [have] tax cuts when you have 10% inflation.
“You only deal with inflation by slowing in a controlled way. The economy dies. So it’s not the day or the time for tax cuts.”
During his speech, Mr Hunt is expected to reference the “difficult decisions” taken to stabilise the markets following the so-called mini-budget – the event that saw him brought in to reverse policies and calm the markets.
“Today, we deliver the next part of our plan: a budget for growth,” Mr Hunt will say.
“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people… all whilst making our country one of the most prosperous in the world.”