The move is expected to cut energy bills by £50 a year per household, with the cost now met instead through general taxation, in a bid to stave off Labour leader Ed Miliband’s attacks on the cost of living.
Osborne gave a preview of policies that will appear in the Autumn Statement this Thursday, including plans to allow energy companies to spread home insulation programmes over two years instead of four and a scheme to give those who buy new homes £1,000 to insulate them, which will run alongside the Green Deal.
The package of measures, designed to provide what David Cameron called a “serious and credible plan that actually works,” will be funded through tougher measures on tax avoidance.
Other policies likely to be included include a further increase in the personal allowance, a possible fuel duty freeze and an announcement on tax-free childcare. An increase in the amount savers are allowed to deposit in an Isa per year could also be on the cards, although economists are warning against plans discussed by civil servants to cap the amount that could be saved over a lifetime to £100,000.
The chancellor is also expected to make an announcement on capital gains tax for overseas-based property investors, in a move partly aimed at cooling London property prices. Plans to increase the one per cent stamp duty threshold or to reform the tax in other ways have also been discussed.
Speaking on the BBC’s Andrew Marr show, Osborne said he would stick to his “responsible recovery” plan and warned against more borrowing, despite signs that the economy is growing sharply.
“I’m going to have to make difficult decisions this week,” he said, adding that it was “pretty clear” that the government must do more on welfare – “One of the things that makes the public finances unsustainable”.