Kwasi Kwarteng is racing to draw up a rescue package to protect millions of households from surging energy prices as demands grow for a VAT cut to household bills.

The Business Secretary is seeking to protect consumers from a predicted jump in the energy price cap that will send annual gas and power bills up to £2,000 or more from April.

Experts have warned that the increase, 56pc higher than the current cap, risks tipping a further 1.5m households into fuel poverty without urgent action.

It came as a fleet of liquid natural gas carriers set out for Europe from the US in a bid to alleviate severe shortages.

Mr Kwarteng has frequently ruled out direct financial support to energy companies but is understood to be considering a series of other interventions including extending fuel grants.

Meanwhile, industry leaders are calling for the Government to axe the 5pc VAT on household energy bills originally imposed by Brussels when Britain was part of the European Union.

The tax, which Boris Johnson and Michael Gove pledged to axe after Brexit in a 2016 op-ed for the Sun, is set to hand the Treasury an extra £1.4bn a year if bills rise as expected.

Analysts at Investec believe the expected bill increase in April would add 1.8 percentage points to inflation next year without mitigation, squeezing families at the same time as they are hit by the biggest tax rise in decades.

Adam Scorer, chief executive of National Energy Action, the fuel poverty charity, said: “Government needs to provide immediate financial assistance to those on the lowest incomes, require a below market-rate, discounted price in the medium term and insulate them from crippling bills for good through a major, targeted energy efficiency programme for the fuel poor. 

“At the very least the Treasury should use its own tax windfall created by the energy crisis to take the sting out of these catastrophic price rises for those least able to weather the gathering storm.”

Wholesale natural gas prices in the UK and Europe have been climbing for months amid a global gas supply shortage, lower imports to Europe from Russia and other factors affecting energy supplies such as low wind and nuclear power outages. Gas prices have climbed about six-fold since last summer and analysts expect high prices could drag on to 2023.