Chancellor Rachel Reeves has suggested poorer households will receive “greater support” in an energy subsidy package as oil supply worries intensified after a key Iranian island was attacked.
Reeves has said she “found the money” to announce a support package for people not supported by the energy price cap, including rural communities which use heating oil, as she hinted at different tiers of support.
Her comments on potential energy support came hours before President Trump said he had “obliterated” Kharg island, which accounts for around 90 per cent of Iran’s oil exports.
Speaking about a “targeted” programme, Reeves told The Times: “When I came in, there was no money left. Interest rates were too high. Our borrowing costs were too high. They were much higher than other countries and they were not coming down. It’s taken a year and a half to get us into that better place.
“I have found the money and we’ve worked through with MPs and others a response for people who are not protected by the energy price cap. We’re giving greater support to those who really need it.”
Reeves at the whim of Trump’s actions
Reeves warned that public finances remained vulnerable, referring to the “cost” of Russia’s war in Ukraine on government debt payments.
The government is projected to pay its lenders up to £110bn over the course of the current financial year whereas debt interest payments came to under £60bn in 2021-22.
After the gas price shock in 2022, the Conservative government stepped in with a near-£50bn support package to support households with bills.
Reeves said there was some time for the Treasury to plan the support as the next energy price cap will only be set in May before coming into effect from July.
She said she preferred not to unfreeze fuel duty but would keep the tax “under review”.
The war in Iran has already triggered fears of an economic downturn and higher inflation as oil prices have risen by over 40 per cent since the start of the war to over $100 per barrel.
Analysts fear the price shock could worsen after President Trump revealed that Kharg island had been targeted.
In a post online, Trump said: “The United States Central Command executed one of the most powerful bombing raids in the History of the Middle East and totally obliterated every MILITARY target in Iran’s crown jewel, Kharg Island.
“I have chosen NOT to wipe out the Oil Infrastructure on the Island. However, should Iran, or anyone else, do anything to interfere with the Free and Safe Passage of Ships through the Strait of Hormuz, I will immediately reconsider this decision.”
Iran said its oil and energy infrastructure would be “immediately destroyed” if energy facilities were attacked.
Trump also announced he was sending 5,000 American troops to the region, fuelling speculation that the US would attempt to take over production and trade over oil.
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