Cabinet minister admits £200 help with fuel bills is ‘a loan’ despite Rishi Sunak’s denials

Brandon Lewis contradicts chancellor, who has rejected criticism that he is piling up debt on struggling households

A cabinet minister has admitted a £200 payment to help households with soaring energy bills is “a loan” – after Rishi Sunak repeatedly rejected the claim.

Controversy is growing over the October measure – requiring repayments of £40 a year over the following five years – because those bills will land as fuel costs are expected to keep rising sharply.

This week, the chancellor rejected criticism that the “heat now, pay later” scheme is storing up problems for the future, telling MPs: “It is not debt. It is not a loan.”

But when it was put to Brandon Lewis, the Northern Ireland Secretary, that the £200 is “a loan let’s remember”, he briefly replied: “Yes” – before adding: “No, I said that.”

The End Fuel Poverty Coalition has warned that vulnerable families will be pushed further into debt by the measure, also criticising the decision to make it compulsory.

Labour has branded it “a scam”, arguing around one million people who will not receive it – first time buyers, separated couples, students and care leavers – will still be liable for the future charges.

“There’s a million people who are not going to get the £200, but they still have to pay the money back,” said Rachel Reeves, the shadow chancellor.

But, under fire at the Commons Treasury committee on Monday, Mr Sunak denied he is forcing people to take on more debt, saying: “It is wrong to worry people that that is what is happening, because it is clearly not.”

The chancellor insisted: “It is not debt. It is not a loan. There is no interest on it. No one’s credit rating is impacted.”

He added: “Describing it as a loan is wrong. It is spreading the impact of a price increase over five years rather than having to deal with it all in one go at the beginning. I think that is a good thing.”

Mr Lewis stumbled as he defended not giving families more help with the cost of living crisis, telling BBC Radio 4: “We’re already at record levels of borrowing since the Second World War.”

Analysts have warned that the UK is heading for the worst plunge in living standards since the 1950s and an explosion in poverty that will push 500,000 more children below the breadline.

Pensions and benefits are going up by only 3.1 per cent this month – yet inflation is predicted to hit 8 or 9 per cent later this year.

But Mr Lewis argued the government is ‘putting £22bn in people’s pockets”, pointing to a higher minimum wage and the higher National Insurance threshold, from June.

“We’ve got to recognise there is massive international pressure as we come out of Covid in terms of energy prices. Obviously the war in Ukraine is having an acute pressure at the moment,” he said.