Families hardest hit by energy crisis could be given funds dispensed by councils in England | Economics

Families most affected by the looming energy crisis caused by the Iran war could receive funds distributed by local councils, under plans being considered by UK ministers looking to control costs.

As concerns grow about the impact of rising fuel and energy costs in response to a protracted conflict in the Middle East, a government official said various options for extending support were being discussed in Whitehall.

Extra cash could be injected into the crisis and resilience fund (CRF), a £1bn-a-year council-run program in England that will come into force from Wednesday “to provide preventive support to communities as well as helping people when they face a financial crisis”, according to one of the plans.

It is understood the funding could be increased to help alleviate households identified by councils as facing particular hardship due to high energy bills.

Chancellor Rachel Reeves is examining plans to support households whose energy bills are predicted to reach around £2,000 a year from July.

But it has rejected universal support that Liz Truss’ government would offer in 2022 and is under pressure from financial markets to limit the scope of support to stay within budget spending limits.

Thinktanks are calling on the government to act quickly to identify the poorest households due to concerns about the complexity of the task.

Between 2022 and 2024, following Russia’s invasion of Ukraine, Treasury calculations showed that households in the top 10% of income earners received an average of £1,350 in direct energy bill support.

An official said it was important to target support this time.

Torsten Bell, who works at the Department for Work and Pensions and the Treasury, is understood to be co-ordinating the government’s response.

Bell is known to be concerned that bailouts targeting only those claiming benefits would generate negative headlines from parts of the media concerned about the decline in living standards among low-wage workers who often do not qualify for government support.

Expanding the CRF will allow households with high bills but who do not currently qualify for benefits to apply for grants.

Treasury declined to comment.

Last week Reeves told the House of Commons: “The progressive, universal approach we have taken is the right approach… £150 off everyone’s energy bills, but then targeted support for those who need it most.”

He added: “Contingency planning is in place for every eventuality to keep costs low for everyone and provide support to those who need it most. We operate within our strict fiscal rules to keep inflation and interest rates as low as possible.”

Government borrowing costs have increased worldwide since the US and Israel attacked Iran; financial markets calculated that governments would be forced to borrow more heavily to cope with the aftershocks of war.

Declines in bond prices increased the yield, or interest rate. On Friday, the interest rate on the 10-year debt reached just above 5%, its highest level since the 2008 financial crisis. Rates fell to 4.95% on Monday.

Without a ceasefire or resolution to the Middle East conflict, rising yields will further increase the interest bill on government debt and eat into the Chancellor’s budget space.

Brent crude is on track for a record monthly gain of nearly 60%, surpassing gains made during the 1990 Gulf War.

The global oil benchmark rose 3.5% to just over $116 a barrel on Monday.

Which is the latest? The Consumer Insight Tracker found that rising prices have forced half of UK households, an estimated 14 million people, to make at least one adjustment – ​​dipping into savings, selling belongings or taking out a loan – to cover the cost of daily essentials.

Many European governments have taken action to reduce the pressure on households. Madrid lowered the VAT level on fuel, while Berlin limited German gas stations to one price increase per day.

French prime minister Sébastien Lecornu said the government plans to increase the number of households eligible for support.

It said an additional 700,000 households would receive an average of €153 (£133), bringing the total number of beneficiaries to around 3.8 million, at a cost to the state of €600 million.

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