Chancellor John Healey is considering a significant intervention to reduce energy bills for poorer households, to be announced at this month's budget. This comes as ministers are reportedly concerned by forecasts indicating energy bills could increase by hundreds of pounds in January.
Mr Healey is working on plans to allocate more than £1bn to assist energy consumers. The majority of this funding is expected to go towards increasing the discount provided to households receiving certain benefits.
While final decisions are pending, Mr Healey is expected to decline Energy Secretary Miatta Fahnbulleh's proposal to spend billions more on removing levies from bills entirely. However, energy officials are developing more radical changes that could be implemented after the budget, which would alter how much companies can charge customers rather than subsidising bills.
Government sources suggest the budget will be low-key and focused on reducing the cost of living for voters. The chancellor is also facing a cash crunch due to additional defence spending and the need to rebuild his fiscal buffer, with tax increases, possibly including higher bank taxes, being considered.