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Time to look at energy consumption amid soaring bills, says Chancellor

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ouseholds need to look at how they are using energy, the Chancellor suggested amid calls for urgent Government intervention to tackle soaring energy bills.

It comes as outgoing Prime Minister Boris Johnson predicted a “tough” few months ahead – but promised energy prices will eventually come down amid grim predictions about the impact the 80.06% rise in the energy price cap will have on millions of the poorest households across the UK.

Nadhim Zahawi, who is likely to be out of a job in the coming days if Liz Truss becomes prime minister, stressed on Friday that the Government is not paralysed by the Tory leadership contest and focused on preparing options for whichever candidate emerges as the winner.

The Chancellor told broadcasters help from the Government is coming, but admitted: “We know that’s not enough. We’ve got to do more.

“We need to make sure that this isn’t a sticking plaster, that for the long term we continue to help the most vulnerable who have no cushion, and that’s what I’m determined to do.

Prime Minister Boris Johnson posed for photographs as he met members of staff on Friday (Kirsty Wigglesworth/PA) / PA Wire

“And we’re working up those options for both households and for business for the incoming prime minister on September 5 to take those decisions.

“So my message today is, ‘We’ll get this £37 billion to people to help them for now, and then more will be coming because we know this will continue in January and, of course, on to April and next year and we have to remain resilient’.”

But Mr Zahawi also acknowledged that it is perhaps now the time to give greater heed to how we use energy.

“The reality is that we should all look at our energy consumption. It is a difficult time. There is war on our continent.

“Very few people anticipated war. Wars happen in far-flung places. It is now here with us. We have to remain resilient. My responsibility is to deliver that help.”

Mr Johnson, entering his final few days in office, also said the Government has a “big, big package of help and support”.

He said the “extra cash” will come in September.

“There’s a pipeline of cash coming through over the next few months and through the autumn and the winter. But that is clearly now going to be augmented, increased, by extra cash that the Government is plainly going to be announcing in September,” he told broadcasters during a trip to the South West London Elective Orthopaedic Centre in Surrey.

“This will go on for a few months and it will go on over the winter,” he said, speaking after returning from a visit to Ukraine.

“And it will be tough – and I’d be very clear about that – but in the end, we are also putting in the measures we need to ensure that we have the energy independence to get through this.”

Mr Johnson has been accused of presiding over a “zombie Government” in recent weeks, with the promise of fresh Government help on energy bills delayed until a new prime minister takes office at the start of September.

He said the UK needs to get through the global spike in energy caused by the war in Ukraine and Russian President Vladimir “Putin’s ability to blackmail”.

Opposition politicians, industry regulator Ofgem and campaigners were all united on Friday in calling on the Government to intervene urgently, as charities warned that households across the country could be plunged into poverty by the soaring energy bills.

The Institute for Fiscal Studies (IFS) suggested that whoever becomes the next prime minister will be unable to avoid putting together a “substantial package of support”.

The new rise in the price cap, the IFS said, means current Government support will only cover 47% of the rise in bills.

It said covering the same proportion of the energy price rise now would cost a further £14 billion.

Looking beyond this winter, energy prices also look like they will remain very high well into next year, which will put pressure on the government to provide further support in the coming months

The IFS said it is difficult to assess the impact of Ms Truss’s plans to cut green levies.

“Cutting only those levies that still add to bills would be complex as they are linked to various schemes and subsidies and apply to business as well as households, but would save households around £50 on average over the three months from October,” the think tank said.

Rishi Sunak’s plan to cut VAT on household energy bills, the IFS said, would save a typical household £51 between October and December at a cost of £1.4 billion.

“Looking beyond this winter, energy prices also look like they will remain very high well into next year, which will put pressure on the Government to provide further support in the coming months,” IFS economist Isaac Delestre said.

“Whoever becomes the next prime minister will most likely be announcing a substantial package of support very soon after taking office.”

Sir Keir Starmer attacked the Government for being ‘missing in action’ (PA) / PA Wire

The Resolution Foundation think tank said the country is facing a “winter catastrophe” unless the Government provides extra support.

It said any extra support needs to target those who need help most, while also reflecting households’ differing level of energy usage and stretching beyond simply the benefit system.

Currently, none of the proposals from leadership candidates or opposition parties pass such a test, it added.

Torsten Bell, chief executive of the Resolution Foundation, said: “The benefits system has a crucial role to play this winter, but the scale of the crisis means that combining this with more radical approaches now looks all but inevitable.”

Chancellor Nadhim Zahawi said he was ‘working flat out to develop options’ (Liam McBurney/PA) / PA Wire

The proposals put forward by frontrunner Ms Truss and rival Mr Sunak have both been criticised for failing to meet the scale of the challenge, with the Foreign Secretary promising an emergency budget to address the cost-of-living crisis if she enters Number 10.

A spokesman for Ms Truss said on Friday that as prime minister she would “ensure people get the support needed to get through these tough times”.

Mr Sunak also told broadcasters that protecting people from rising energy bills would be his “immediate priority” as prime minister.

Labour has been vocal in attacking the proposals put forward by both candidates as failing to meet the needs of the public.

Sir Keir Starmer, the Labour leader, said the Government is “missing in action”.

He also did not rule out Labour’s £30 billion plan to tackle the cost of living needing to be adjusted to a higher amount.

“What we’ve got is a fully costed, comprehensive plan for this winter which will freeze those prices. That is welcome news to so many people who are worried sick today.”

But Sir Keir added: “I accept that in April, May next year, we need to look forward then to the proposals in place.

“That’s why I’ve said, alongside our plan, we need medium and long-term solutions. We need to be much more self-sufficient when it comes to energy.”

Jonathan Brearley, Ofgem’s chief executive, early on Friday said the problem is beyond what the regulator can address by itself.

Liz Truss is the frontrunner in the Tory leadership contest (Joe Giddens/PA) / PA Wire

Appearing on BBC Radio 4’s Today programme only minutes after the price cap announcement, he accepted the news would be “devastating” for many families.

“The truth is this is beyond the capacity of the regulator and the industry to address. So what we are saying today is, ‘Look, we have 10 days now until we have a new administration, have a new prime minister and a new ministerial team’.

“What I am clear about is the prime minister with his or her ministerial team will need to act urgently and decisively to address this.”

Liberal Democrat leader Sir Ed Davey said the rise in the energy price cap is “nothing short of a catastrophe” for millions.

Business groups and think tanks continued to offer stark warnings over the course of Friday, with the CBI arguing the scale of Government help needs to be “urgently reviewed”.

Chairman of the Business, Energy and Industrial Strategy Committee, Darren Jones, also warned “many businesses will face bankruptcy because there is no price cap on their energy bills”.

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