Millions of households will get no help to pay soaring energy bills, Rachel Reeves has indicated as she warned the Iran war will create “significant” challenges for the UK economy.
The chancellor hit out at the last Conservative government for providing “blanket” support in the wake of Russia’s attack on Ukraine, which she said had cost the country tens of billions of pounds.
Instead, Ms Reeves made clear Labour ministers will offer targeted rather than universal support “to those who need it most”.
The crisis in the Middle East has pushed up oil and gas prices, hitting motorists as they fill up at the pumps while the average annual household energy bill is predicted to rise by £332 in July.
But giving a statement to the Commons on Tuesday, the chancellor said that blanket support offered under Liz Truss “gave the support to the most wealthiest of households” and “left us with high levels of national debt, a cheque written then for a bill that is still being paid today”.
While she indicated that more targeted support would be offered, she said this support wouldn’t be unveiled for another month.
Ms Reeves also announced plans to meet with supermarkets and banks later this week to discuss what help they can offer customers, while the Competition and Markets Authority is being given new powers to clamp down on price gouging.
She told MPs: “Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.
“This is not a war that we started, nor is it a war that we joined… but it is a war that will have an impact on our country.
“The challenges may be significant but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest.”
The announcement was dismissed as “unbelievably weak” by Green Party leader Zack Polanski, who accused Ms Reeves of failing to “understand the scale of the cost of living crisis about to his this country”.
Meanwhile, Tory leader Kemi Badenoch said scrapping taxes on energy bills would be “much better” than offering targeted support to protect against an expected hike in costs.
With fuel duty set to rise in September, the Tory leader said: “It’s completely crazy to be increasing fuel duty at this time, and let’s drill our own oil and gas in the North Sea.”
She also criticised the government for failing to prepare for the Middle East crisis.
“Keir Starmer has been caught with his pants down, not being prepared, not knowing what’s coming, not having any answers except sticking his head in the sand,” she said.
However, the Confederation of British Industry (CBI) was among those who said the government was right to consider a targeted approach.
“This is not the time for knee-jerk, unsustainable solutions that could harm the UK’s public finances”, the think tank’s chief executive Rain Newton-Smith said.
But she added that businesses were already facing “sky-high energy costs” before the war, arguing the government “can do more now, including cutting policy costs from firms’ bills and targeted support for energy efficiency”.
The average pump price of a litre of unleaded petrol in the UK stood at 144.2p on Monday, up 3.9p week on week and a jump of 12.0p since March 2, shortly after the start of the crisis. This is the highest price for unleaded petrol since July 2024.
Meanwhile, the average price of a litre of diesel stood at 166.9p on Monday, up 8.1p week on week and an increase of 24.7p since March 2, the Department for Energy Security and Net Zero figures showed – the highest price for diesel since March 2023.
The RAC Foundation said motorists in the UK had already paid £307m more for fuel than they would have if prices had remained at the level they were before the US-Israeli attack on Iran on February 28.
Responding to the chancellor’s statement, Mr Polanski said: “This is an unbelievably weak response from the chancellor to the enormous bill hikes facing households in the UK.
“Monitoring the situation? Considering new powers? Reeves’s lukewarm words show that she and her government simply do not understand the scale of the cost of living crisis about to hit this country.
“We need a guarantee that energy bills will not rise past June, funded by a strengthened windfall tax and higher taxes on extreme wealth.
“And the government should follow the example set by Spain in taking immediate action to reduce the burden on households by freezing rents.”
