Reeves drawing up plans to help with energy costs as Iran war continues

Gas and electricity bills are covered by regulator Ofgem’s price cap which is fixed until June, but if the conflict continues and Iran maintains its stranglehold on shipping in the Strait of Hormuz, then, households could face dramatic hikes at that point.

But about 1.5 million households relying on heating oil already face soaring costs, with the price per litre doubling since the start of the crisis.

In an interview with The Times, Ms Reeves indicated a subsidy package would be set out next week: “I have found the money and we’ve worked through with MPs and others a response for people who are not protected by the energy price cap.

“We’re giving greater support to those who really need it.”

There is more time to draw up a plan for gas and electricity bills, because of the price cap.

Analysts at Cornwall Insight have forecast that household energy bills could rise by 10% from July following sharp increases in wholesale gas prices.

This would mean Ofgem’s price cap for July to September surges to £1,801 a year for a typical dual fuel household – an increase of £160 or 10% on April’s cap.

“We’ve got some time, and we are working through in the Iran response board (a group of Treasury ministers and officials) different approaches that we could take, including looking at more targeted options,” the Chancellor told The Times.

“We are working through different scenarios at the moment and I don’t want to suggest that we’re going to do something that we know we’re not able to deliver.

“I am concerned given how high our debt is, the debt that we inherited, and so I want to look at what the different options available would be.”

She played down the prospect of a blanket energy bailout for households, as happened in the wake of Russia’s invasion of Ukraine at the cost of about £35 billion over a six-month period.

“It is important even when there is an economic shock — or perhaps particularly when there’s an economic shock — that you continue to be disciplined about your use of public money,” she said.

Lord Richard Walker, the cost-of-living tsar, was meanwhile asked by the BBC’s Newsnight whether soaring petrol prices are justified.

He replied: “No, because the supplies are fine, and I’ve been told that.”

The minister also said the US-Israeli war with Iran has not made efforts to tackle living costs “any easier”.

Lord Walker added: “People are quite rightly concerned. I fully understand that. What I would say is there’s been a bit of resilience that’s now been baked in to our economy.

“I think what this has done is redoubled our resolve to try and help wherever we can with the cost of living and redoubled our efforts.”

In other developments:

– US president Donald Trump said military targets on Kharg Island, a vital part of Iran’s oil economy, had been “totally obliterated” by “one of the most powerful bombing raids in the history of the Middle East”.

– He threatened to “wipe out” the oil infrastructure on the island should Tehran prevent the passage of shipping through the Strait of Hormuz.

– The US ordered 2,500 marines and an amphibious assault ship to the Middle East in a sign the conflict could deepen.

– An airstrike hit a house in Iraq’s capital Baghdad early on Saturday, killing at least one person, and a missile later struck a helipad inside the US Embassy in Baghdad, two security officials told the Associated Press.

– The Joint Maritime Information Centre said there had been at least 20 incidents involving shipping and offshore infrastructure in the Arabian Gulf, Strait of Hormuz and Gulf of Oman since March 1.

– Ms Reeves and Energy Secretary Ed Miliband called in oil firm bosses and forecourt operators to Downing Street on Friday to express concern about rising fuel bills.

– Official figures showed economic growth flatlined in January, heightening fears that soaring fuel and energy prices caused by the US-Israel attacks on Iran could send the struggling UK economy into a recession.

The Strait of Hormuz, a vital route for oil and gas tankers, usually sees 138 ships a day pass through but that has declined to about five due to the threat of attack.

The threat to global supplies has led to volatility in oil and gas prices, feeding through to the higher fuel bills and the risk of increased household energy costs.

A Government spokesman said: “We know that people are concerned about the potential impact of global conflicts on the cost of living.

“While it is too soon to know the full impact of this crisis, as the Chancellor said, she will take the necessary decisions to help families with the cost of living and protect the public finances.

“We have extended the 5p fuel duty cut, expanded the Warm Homes Discount to take £150 a year off of energy bills for six million households and the energy price cap will protect households for the next three months as bills will fall by £117”.

Tory leader Kemi Badenoch called for the Chancellor to scrap September’s “stupid” planned increase in fuel duty, which she said was “the last thing we need”, and demanded the UK should “start drilling” in the North Sea.