“One option would be to expand the previously announced energy support package. The measures already announced cover around half the increase in domestic energy costs, so if the Chancellor wanted to expand the scheme to offset half the £43billion increase in costs, it would cost an additional £12.5billion, on top of the £9billion already announced.”
Mr Moore noted that this route would be “extremely expensive” and may not even reach the households most in need.
He shared an alternative: “Instead, the Chancellor may uprate benefits by an amount greater than the 3.1 percent currently pencilled in. The IFS estimates this would cost an additional £9billion for the exchequer. Moderately cheaper and more targeted, but middle-income households may feel they’ve been left out in the cold.”
“A final option could be to look at VAT on energy supplies, including fuel. The IFS estimates that reducing VAT down to zero on domestic fuel would be £2.4billion, so a significantly cheaper option, but it would be very broad-brushed and not targeted. The Chancellor has already ruled out a reduction in VAT on energy bills for precisely that reason.
“No choice is easy, and no choice is cheap. Whichever option the Chancellor chooses, it will not completely offset the increase in energy costs. Expect political tensions to rise considerably over the following months.”
Other predicted changes
Dominic Bourquin, corporate tax partner for MHA Monahans, believes that interest rates will increase again by the end of the year as a way to control rising inflation, which will undoubtedly be met with “large-scale criticism”.