Budget energy bailout just for poorest benefits claimants could be a disaster like winter fuel allowance, warns Labour ex-Cabinet minister

A Budget energy bailout that only targets the poorest benefits claimants could be a disaster like the winter fuel allowance, a former Cabinet minister suggested today.

Darren Jones, a key Keir Starmer ally, urged John Healey to 'meet the moment' by easing the pressure on households from spiralling bills.

He insisted the Chancellor should 'learn from the winter fuel debacle' and set an 'optimal' threshold for people getting help - noting that subsidising bills in itself would help to keep the inflation rate down.

The intervention came amid widespread speculation that Mr Healey will focus support on those on benefits in his package next Wednesday. 

He is believed to be looking at increasing the Warm Homes Discount from £150 a year to £250, covering around six million households who claim payments such as universal credit. The measure would potentially be funded with a raid on banks.

Andy Burnham has also hinted gas standing charges could be axed. However, the daily levies are likely to be simply shifted to unit costs.

There could be protections for low income households with high gas usage, but larger families not on benefits would face increased bills. 

The Middle East crisis has been causing havoc on international energy costs, with households bracing for another wave of pain in the coming months. 

A 4 per cent hike to Ofgem's energy price cap took effect from October 1 as forecasters warned household bills could soar by almost another £300 from January.

Cornwall Insight's latest forecast predicts the price cap will rise by a further 16 per cent to £1,999 a year on January 1, up by £276 on the level between October and December and the biggest rise since January 2023.

Other forecasters believe the level could rise even higher. 

In an effort to help households, the Government has temporarily removed the 5 per cent VAT from electricity bills until March 31 next year to cut around £45 a year.

Households are still paying 5 per cent VAT for gas.

Last week, Ofgem's new chief executive Tim Jarvis warned of a 'difficult' winter ahead as he raised concerns that 'people are going to struggle' without help.

Writing in the Times, Mr Jones cautioned that the Labour Government's fate rests on addressing the cost of living. 

'Given the challenging winter ahead, with hikes to energy bills and El Niño causing more extreme weather, and higher-than hoped-for inflation expected next year, MPs will be asking on behalf of their constituents: does this Budget meet the moment?' he said. 

'If it doesn't, 2027 could be a challenging year not just for the economy, but for the public's support of the government.

'For the consumer, energy and water bills, council tax, the weekly shop and rent or mortgage payments are the most important proof points when deciding if the economy is heading in the right direction. 

'That's why MPs will be expecting to see support for energy bills.'

In an apparent call for broad support on bills, Mr Jones referenced the decision to scrap winter fuel allowance for all but the poorest. 

The policy announced in July 2024 reduced the numbers eligible from nearly 11million to just 1.5million. After causing huge political damage, it was reversed so that three-quarters of pensioners receive the payments.

Mr Jones said: 'The government should learn from the winter fuel debacle and ensure the threshold at which people get support is optimal, noting the benefit of mechanically keeping inflation lower than it might be by keeping bills down.'