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The UK government is preparing to assist those most vulnerable if energy prices surge as a result of the escalating conflict between the US, Israel, and Iran. Chancellor Rachel Reeves emphasized that contingency plans are being developed to address all possible outcomes, although the full economic impact on the UK remains uncertain.
Starting in April, energy bills for millions across England, Scotland, and Wales are due to decrease temporarily for three months, following Ofgem’s quarterly price cap adjustments. However, experts anticipate a significant increase in gas and electricity costs over the summer months, driven in part by disruptions in the Strait of Hormuz, a critical passage through which around 20% of the world’s oil and liquefied natural gas typically flows.
The sharp rise in wholesale oil and gas prices amid the fourth week of conflict has intensified concerns about rising energy costs for consumers. Despite calls for broader government relief, Reeves indicated that support would need to be targeted rather than universal, distinguishing this approach from the Energy Price Guarantee implemented during the 2022 crisis triggered by Russia’s invasion of Ukraine. The Treasury has noted that the wealthiest 10% of households, who consume the most gas, received the largest portion of previous support packages, averaging approximately £1,350 per household.
Reeves also revealed that the government is collaborating with the Department for Work and Pensions to ensure aid is directed toward those in greatest need, constrained by borrowing limits and a goal to manage inflation and interest rates effectively. Meanwhile, Shadow Chancellor Sir Mel Stride criticized Reeves’s handling of the economy, accusing her of leaving it vulnerable and questioning the government’s capacity to offer the necessary help. Additionally, the chancellor introduced a new “anti-profiteering framework” for the Competition and Markets Authority, aimed at investigating and acting against companies potentially exploiting price hikes, a process that is currently underway but will take time to resolve
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