Chancellor Jeremy Hunt has announced that he will be withdrawing the universal energy price guarantee in April.
The energy price guarantee, which meant the typical UK household would pay no more than £2500 per year on energy, was initially announced as a two-year scheme by Prime Minister Liz Truss.
However, Hunt announced that help with energy bills for all households will only last until April.
The Chancellor said a review would take place to look at a “new approach” to target support at those worst off after that.
Despite the markets blaming the tax plans for recent volatility, Hunt appeared to pin part of the blame on the effort to support people with rapidly rising bills.
In an emergency statement, the new Chancellor said: “The biggest single expense in the growth plan was the energy price guarantee.
“This is a landmark policy supporting millions of people through a difficult winter ad today I want to confirm that the support we are providing between now and April next year will not change.
“But beyond that, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.
“So I’m announcing today a Treasury-led review into how we support energy bills beyond April next year. The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.
“Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.”
Hunt sets out tax reversal in emergency statement
Hunt set out his financial plan for the future in an emergency statement this morning.
The Chancellor announced the Government will scrap plans to reduce the basic rate of income tax from 20% to 19% in April next year, a move that had been forecast would cost the Exchequer almost £5.3 billion in 2023-24.
He also confirmed the Government will ditch plans for new VAT-free shopping for international tourists.
It comes days after Truss announced another financial U-turn as she reversed plans to stop a planned increase in corporation tax.
Government sources had predicted that, while abandoning the plan was likely, they did not see corporation tax rising to the previously suggested 25%.
However, in her conference, Truss said: “It is clear that parts of our mini-budget went further and faster than markets were expecting so the way we are delivering our mission right now has to change.”
