The government is reportedly mulling bank loan proposals to smooth a hike in the cost of energy bills expected this year.
The latest projections suggest households could face crippling bills with the energy price cap set to almost double to £2,400 a year from October, according to EnAppSys analysis for the FT.
A cost deferral mechanism is reportedly being considered by ministers under which banks would lend billions of pounds to energy companies to let them spread the increase in gas bills over five or 10 years, the BBC first reported.
The price cap protects millions of households in the UK who do not opt for fixed-price deals and is on track to rise by more than 50 per cent in April to £2,000 per year. Analysis by the FT and EnAppSys predicts bills rising still higher later in the year unless the government and energy regulator Ofgem step in to lower costs.
The government is also reportedly considering using the Bank of England to provide upfront funding to firms in order to smooth out price hikes. Another option for the government to reduce the impact of the tariff hike include an expansion of a discount scheme for low-income households or a reduction to taxes on energy.
Boris Johnson is under pressure to act quickly before a rise in the fuel price cap, expected in April, takes Britain’s inflation rate to six per cent or higher. Brits will also be hit with a controversial hike in national insurance tax later this year putting further pressure on households.