Energy bills: Boris Johnson says no further plans to help hard-up families amid growing cost-of-living crisis

·Political Correspondent, Yahoo News UK
·5-min read
Prime Minister Boris Johnson during a media briefing in Downing Street, London, on coronavirus (Covid-19). Picture date: Friday May 14, 2021.
Number 10 has said there are no plans for any additional support to help struggling Brits amid the escalating cost of living crisis. (PA Images)

Boris Johnson has said there are no plans for additional funding to help hard-up Britons ahead of a looming cost-of-living crisis driven by rising inflation and soaring energy prices.

However, asked about whether the government could cut VAT on energy bills, the prime minister insisted he is ruling nothing out.

Experts have warned that families face a squeeze on their finances this year, with household energy bills set to shoot up by 50%.

The Resolution Foundation think-tank has warned the combination of higher energy prices, rising inflation, and tax increases could have a “catastrophic” impact on those on low incomes.

Read more: Energy crisis: What is fuel poverty?

Asked about an article he wrote in May 2016 in which he said that Brexit would mean lower energy costs because EU rules prevented the UK from "scrapping unfair and damaging" VAT from bills, Johnson denied misleading voters. He said scrapping VAT was a “blunt instrument” that wouldn’t help those most in need right now.

“It is slightly paradoxical that this [calls for lower VAT on fuel bills] is being campaigned for people who wanted to remain in the EU”, he told a Downing Street press conference.

“I’m not ruling out further measure and you’re right to draw attention to the potential contained within the freedom to regulate our own VAT.”

But, he said: “The argument is it is a bit of a blunt instrument and the difficulty is you end up also cutting fuel bills for a lot of people who don’t need the support in quite the direct way that need to give it.

“We need to help the people in fuel poverty.”

The PM went on to cite the warm home discount, winter fuel payments, cold weather payments and a £500m fund to help those in need as measures the government was already taking.

VAT on energy bills is already only set at 5% – much lower than the tax on most other goods and services.

Earlier, a No 10 spokesperson confirmed there were no further plans to introduce new measures aimed at lessening the impact of increasing cost of living on the worst off.

Energy sector specialists Cornwall insights have said that energy bills could rise from an average of £1,277 per year to £1,865 – a hammer blow for the estimated three million households living in fuel poverty in the UK.

Watch: Inflation hits 10-year high as fuel, fashion and food prices surge

The Resolution Foundation described 2022 as the "year of the squeeze", despite the national living wage rising by 6.6%.

And Money Saving Expert founder Martin Lewis warned of a "seismic" impact from rising energy bills and called for a "substantial intervention".

"We are going to see a minimum 50% increase in energy prices in the system and that is unsustainable for many," he said.

There have been calls from within Boris Johnson's own party to cancel tax on fuel and energy bills, with 20 MPs, including five ex-ministers, penning an article in The Telegraph on the issue.

"We hardly need to point out that high energy prices, whether for domestic heating or for domestic transport, are felt most painfully by the lowest paid," they wrote.

Read more: 'Devil's choice': The people most at risk from the fuel crisis

The Treasury cited freezes to alcohol and fuel duty, the Warm Home Discount, and the energy price cap as measures included in £4.2bn worth of funding.

However, they did not outline any plans to cut tax on energy bills.

“We know people are facing pressure with the cost of living, which is why we’re taking £4.2bn of decisive action to help," said a Treasury spokesperson.

“Our support includes reducing the universal credit taper – a tax cut worth over £2bn – supporting households with their bills through the energy price cap, warm home discount scheme, winter fuel payments, cold weather payments, and household support fund, as well as freezing alcohol and fuel duty.”

Undated file photo of a gas ring on a home cooker in London. Soaring gas prices consigned a string of energy suppliers to the graveyard in 2021, and will lead to runaway household bills next year as the sector continues to struggle. Energy suppliers had been paying 54p per therm of gas at the beginning of the year. By September, that had reached more than �3 and peaked even further to �4.50 just before Christmas. Issue date: Tuesday December 28, 2021.
Experts warn fuel bills could rise by up to 50% over the coming months. (PA Images)

Debt charity StepChange has said new data shows there were already "worrying trends" in the run-up to Christmas following analysis of the characteristics of 13,000 clients that came to them for advice in November.

They say 40% of their new clients were behind on council tax bills, with 25% in rent arrears and 19% in mortgage arrears.

They also found that 22% of their new clients were behind on gas bills, up from 13% in 2019 – with 27% behind on electricity bills, up from 17% in 2019.

Read more: Martin Lewis on energy bill crisis: 'I can't help you anymore - the system is broken'

Director of external affairs at the charity, Richard Lane, called on government to intervene.

“Even in November, before the main Christmas spending period, the rise in credit card borrowing is likely to be reflecting an element of financial pressure among some households," he said.

"We know that a typical household coping strategy is to turn to credit to help meet the costs of basic essentials during a worrying period of sharp rises in the cost of living.

"Since this November data, the pressures have worsened so it is vital that policymakers are thinking ahead to help mitigate the risk of a rising debt crisis in 2022.”

Watch: Britons facing 'cost-of-living catastrophe' with average household £1,200 worse off, experts warn

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