Families most affected by the impending energy crisis caused by the Iran war could be given cash grants from local councils, under plans being considered by UK ministers to cover the costs.
As concerns grow about the impact of rising fuel and energy costs in response to the ongoing conflict in the Middle East, a government official says a number of ways to increase support are being discussed within Whitehall.
Under the same plan, more money can be put into the crisis fund (CRF), a council project of £1bn a year in England that will start working from Wednesday “to provide preventive support to the community, as well as to help people when they face financial difficulties”.
It is understood that the fund can be added to help families selected by the councils facing high financial problems of electricity.
The Chancellor, Rachel Reeves, is reviewing plans to support households with energy bills forecast to hit around £2,000 a year from July.
However, he rejected the universal support offered by the government of Liz Truss in 2022 and is under pressure from the financial markets to reduce the size of the support to keep the spending limits.
Thinktanks are urging the government to quickly identify the poorest families amid concerns over the complexity of the job.
Between 2022 and 2024, after Russia’s invasion of Ukraine, Treasury figures showed households in the top 10% of income earners received a total of £1,350 in direct energy support.
Another official said, this time, focusing on support is important.
Torsten Bell, minister for Work and Pensions and Treasury, is understood to be coordinating the government’s response.
Bell has been known to worry that targeted payments to those seeking benefits will attract negative headlines from sections of the media worried about declining living standards among low-wage workers who are often ineligible for government support.
The expansion of the CRF will allow families with high debts but who do not qualify for benefits to apply for subsidies.
The Treasury declined to comment.
Last week, Reeves told the Commons: “The progressive, universal approach we’re taking is the right one… £150 off everyone’s energy bills, but now it’s going towards support for those who need it most.”
He added: “A contingency plan is being developed for each event, so that we can minimize costs for everyone and provide support to those who need it most.
Government borrowing costs around the world have increased since the US and Israel attacked Iran as financial markets calculated that governments would be encouraged to borrow more money to deal with the aftershocks of the war.
Falling bond prices have pushed yields, or interest rates, higher. On Friday, the interest rate on the 10-year bond reached its highest level since the 2008 financial crisis, above 5%. Rates fell to 4.95% on Monday.
Without conflict or a solution to the Middle East conflict, rising yields could increase interest rates on government debt and eat into the chancellor’s finances.
Brent crude is about to rise to a monthly record of about 60%, surpassing the gains it made during the 1990 Gulf war.
The world oil price rose by 3.5% on Monday to more than $ 116 a barrel.
Latest Which? consumer insight tracker has found that rising prices are forcing half of UK households, an estimated 14 million, to make at least one change – investing in cash, selling property or borrowing money – to pay for everyday essentials.
Many European governments have taken action to reduce the pressure on families. Madrid has reduced the level of VAT on fuel while Berlin has German petrol stations to increase the price by one per day.
Sébastien Lecornu, the French Prime Minister, said the government plans to increase the number of families eligible for support.
He said an additional 700,000 families will receive an average of €153 (£133), which will bring the total number of beneficiaries to around 3.8 million, at a cost of €600m for the government.
In a message sent to X, Lecornu says that the machine, which has been in place since 2018, has helped the poorest families to “deal effectively with energy costs and the pressure of purchasing power” by directly reducing bills for electricity, gas or heating oil.
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