The UK government is preparing for a potential energy crisis amid the ongoing conflict in Iran. Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves are working on a response to the crisis, which could lead to a spike in energy costs.
The government has already taken steps to mitigate the effects of the crisis, including asking competition authorities to monitor the energy industry and talking to suppliers. Specific help is being planned for people who rely on heating oil to warm their homes.
The Treasury has created an Iran response board, staffed by ministers, advisers, and senior Treasury civil servants, to pull together a plan to protect the economy from the worst possible effects of the war and spiralling oil prices.
Government Response
Chancellor Rachel Reeves told the Times that the government is "working through different scenarios" to address the potential energy crisis. On Monday, she will announce specific help for people who rely on heating oil, with tens of millions of pounds to be distributed through local councils.
The government is also exploring ways to give financial support to only some families and households, rather than providing a blanket solution. This could involve targeting support to those who are most vulnerable to price increases.
Historical Context
The UK government has previously intervened in times of crisis, including the pandemic and the Ukraine war. The government spent around £70bn on the furlough scheme during the pandemic, and £44bn on an energy bailout in 2022.
Former government officials have spoken about the difficulties of making decisions during times of crisis, and the need to balance the need for support with the long-term costs to the national debt.
Future Plans
The government is considering various options for addressing the potential energy crisis, including tweaking policy to help smaller and medium-sized businesses get better deals on energy contracts. However, ministers are tight-lipped about the details of their plans.
The government's decision to intervene will depend on the scale of the price increases and the impact on households and businesses. As one government source said, "If oil price spikes are followed by big rises in household bills, it is inconceivable to imagine a Labour government not helping people out."
