Households in colder areas could get more help to pay energy bills

Other measures under consideration include a boost to the Winter Fuel Payment, which helps pensioners pay their bills, and a cut to the green levy customers pay to fund investment in renewable energy sources.

A report on Wednesday by centre-right think tank the Centre for Policy Studies suggests that home heating should be brought into the UK’s carbon tax system, in a move that could increase household bills.

The UK’s emissions trading scheme imposes a carbon price on heavy industry, domestic aviation and electricity generation, currently at around £75 a tonne.

The CPS recommends that home heating, agriculture and petrol also be brought into the scheme, in order to encourage a switch to green technologies.

Adding a £50-a-tonne carbon price to heating could raise bills by more than £200 year, according to a 2020 report from the London School of Economics.

The Government has committed to exploring the expansion of the scheme, but is not expected to add carbon pricing to gas bills in the near future. 

On Tuesday, Labour used an opposition day to bring a motion that would have forced MPs to vote on whether to cut VAT on fuel bills, effectively bringing forward the Government’s decision by several weeks.

The party said its plan would save customers up to £600 on their energy bills and pledged to fund the cut with a windfall tax on North Sea oil and gas firms.

“These companies have profited massively because of exploding prices,” said Rachel Reeves, the shadow chancellor. “So much so that some in the industry have referred to soaring energy prices as a cash machine for producers and their shareholders.”

The motion failed, leaving Mr Sunak more time to consider various measures to tackle rising prices. MPs expect the Chancellor to introduce a blended package including measures that will affect all bills plus more targeted support.

The cost of living in the UK has already begun to increase, with inflation reaching a 10-year high of 5.1 per cent in November.

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