Another £12bn 'needed to keep energy bills worth'

Ministers to announce additional $12 billion in aid pounds for households to keep pace with higher-than-expected energy prices this autumn, a leading financial think tank has warned.

The Institute for Fiscal Studies (IFS) said the money was needed if the government is still to provide the same level of aid it had planned this spring.

The effect of this support, unveiled by then-Chancellor Rishi Sunak, dwindled as predicted energy bills soared.

But the IFS also warns that any aid more would create "upside pressure" on already high inflation.

The energy price cap, a cap on how much businesses can charge, is currently set at £1,971 per year.

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But it should climb to almost £3,600 a year in October and over £4,200 in January.

The IFS points out that the cost of living should now be 11.3% higher this fiscal year than last year, with inflation peaking in the last quarter of this year at 13.1%.

However, the think tank adds, as poorer households spend more of their income on energy, the poorest group in society will experience “mind-blowing” inflation. 18% in October, compared to 11% for the wealthiest group.

Paul Johnson, Director of the IFS, said: "The government continues to catch up as inflation and energy costs continue to skyrocket Just to achieve what they wanted to achieve in May will cost an additional £12bn, and a package of this magnitude will still leave many households far worse off ."

"Given the costs, there are real and difficult trade-offs here. Both for households managing their budgets and for the government managing the finances of the economy, some clarity on strategy is urgently needed,” he added.

Boris Johnson was accused of presiding over a "zombie" government while the two Tory leadership candidates, Liz Truss and Rishi Sunak, fight to succeed him as Prime Minister.

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