Millions of the most vulnerable households will receive additional payments taking their total savings this year to £2,200, the Chancellor said. And he vowed the energy price guarantee will help drive inflation down by around five per cent – easing the cost of living pain for many hard-pressed families.
The scheme is part of a two-pronged £200 billion approach by the government to shield households and businesses from the crisis.
Energy costs are being capped, which means that a typical household will pay around £2,500 a year.
Without the help bills would have rocketed to almost £4,000.
Wholesale costs will also be limited to bring down bills for businesses as well as institutions such as schools, hospitals and churches by almost 50 per cent for six months.
The schemes take effect from October 1.
The huge household savings were spelt out by the Chancellor as he unveiled an emergency budget to MPs to address the financial and economic crisis facing the government.
It included a raft of tax cuts to help drive the economy while Mr Kwarteng insisted “help is coming” for people with their energy bills.
He told the Commons: “People will have seen the horrors of Putin’s illegal invasion of Ukraine. They will have heard reports that their already-expensive energy bills could reach as high as £6,500 next year. We were never going to let this happen.
“People need to know that help is coming. And help is indeed coming.”
He said the energy price guarantee will limit the unit price that consumers pay for electricity and gas, adding: “This means that for the next two years, the typical annual household bill will be £2,500. For a typical household, that is a saving of at least £1,000 a year, based on current prices.
“We are continuing our existing plans to give all households £400 off bills this winter. So taken together, we are cutting everyone’s energy bills by an expected £1,400 this year.”
Mr Kwarteng went on to outline the Government’s support for businesses.
The Chancellor told the Commons: “The Energy Bill Relief Scheme will reduce wholesale gas and electricity prices for all UK businesses, charities and the public sector like schools and hospitals. This will provide a price guarantee equivalent to the one provided for households, for all businesses across the country.”
He added that “energy prices are currently extremely volatile, erratically rising and falling every hour”.
Mr Kwarteng said: “This creates real risks to energy firms who are otherwise viable businesses. Those firms help supply the essential energy needed by households and businesses. So, to support them, we are announcing the Energy Markets Financing Scheme.
“Delivered with the Bank of England, this scheme will provide a 100 per cent guarantee for commercial banks to offer emergency liquidity to energy firms.”
Soaring global energy and food costs have helped push UK inflation to almost 10 per cent.
But Mr Kwarteng said the energy price guarantee would have a dramatic effect in reducing it.
“The consensus amongst independent forecasters is that the Government’s energy plan will reduce peak inflation by around 5 percentage points,” he said.
“It will reduce the cost of servicing index-linked government debt and lower wider cost of living pressures.
“And it will help millions of people and businesses right across the country with the cost of energy.
“Let no one doubt: during the worst energy crisis in generations, this Government is on the side of the British people.”
Earlier this week ministers confirmed that households that do not benefit directly from the Government’s energy price cap will get a £100 cash boost to help pay for heating.
Homes that use heating oil rather than gas will get an additional £100 on top of the £400 bills discount already announced.
More than 1.5 million homes in the UK rely on heating oil.