Sunak's cost-of-living scramble as energy bills forecast to hit £2,800

Growing inflation crisis puts rejected windfall tax back on the agenda

- Heather Stewart, Phillip Inman

Rishi Sunak is scrambling to finalise a package of measures - which could be announced as soon as tomorrow aimed at alleviating the impact of the cost of living crisis, after the energy regulator warned annual bills were likely to soar by over 40% in October.

Ministers are under fierce pressure to act after the Ofgem chief executive, Jonathan Brearley, wrote to the chancellor yesterday to tell him the energy price cap, which puts a ceiling on domestic bills, is likely to hit £2,800-an increase of more than £800 - after a sharp rise in April.

"The price changes we have seen in the gas market are genuinely a once-in-a-generation event not seen since the oil crisis of the 1970s," he told MPs.

Treasury officials have been working up plans for a windfall tax that could fall not just on North Sea oil and gas producers, but also electricity generators, including windfarm operators, which have also benefited from soaring global prices in recent months. That is likely to be used to fund a direct energy bill rebate, as part of a package that could be worth up to £10bn.

Alongside help for the low-paid, Johnson is also believed to favour steps to benefit middle-earners, such as a VAT cut, or bringing forward the one-percentage point income tax cut Sunak promised for 2024.