Hunt urged to cut taxes after cost of energy bailout halves

THE estimated cost of the Government’s energy support package has been halved in a boost for hopes that Jeremy Hunt can cut taxes in his next Budget.

Ministers now expect to spend £69billion on subsidising bills for households and businesses during the crisis, down from a previous prediction of £139billion.

The Resolution Foundation, a think tank, said the lower bill will give the Chancellor more fiscal headroom when he lays out his plans next month.

Sir Iain Duncan Smith, the former Conservative Party leader, said the savings on energy support meant that corporation tax increases due this spring should be scrapped. He said: “We need a new plan which should be supply side reforms and tax cuts well before the end of this year to focus on economic growth.”

The Government has been subsidising the energy bills of households and businesses since October last year in an attempt to ease the cost of living crisis, following a surge in wholesale energy prices after the invasion of Ukraine.

Rishi Sunak, while chancellor in May, put in place a plan to give each household £400 towards their energy bills between October 2022 and March 2023.

Liz Truss increased the level of support when she became prime minister in September, with measures to limit typical household energy bills to £2,500 a year and cap businesses bills too. Vulnerable groups such as the elderly were also given extra help.

All this support was expected to cost as much as £139billion, according to a report by the National Audit Office (NAO). But the help on offer was scaled back by Mr Hunt when he became Chancellor, becoming less generous for households from this April. Meanwhile, wholesale gas prices have dropped significantly. In a report yesterday, the NAO said the Government’s current estimate is £69 billion due to “an increase in the level to which bills are reduced [...] changes in wholesale gas price and changes in energy demand”.

A Treasury spokesman said: “It would also be irresponsible to plan fiscal policy on such volatile prices.”