Rishi Sunak vetoed government plan to ease pain from soaring energy bills, leak reveals

Chancellor rejected calls to rethink £200 ‘heat now, pay later’ loan – despite fears it will pile up further debt

Rishi Sunak rejected proposals from a fellow cabinet minister to give more help to families hit by soaring home energy bills, a leaked document reveals.

The chancellor was urged to rethink a £200 loan that households will receive in the autumn, amid widespread criticism that the “heat now, pay later” scheme will pile up further debt.

The Department for Business put forward three options to ease the cost of living crisis, as part of the energy security strategy that aims to wean the UK off foreign fossil fuels.

Kwasi Kwarteng’s department suggested increasing the £200 payment to “£500 or more”, either for all households or for the poorest, an early draft obtained by the i newspaper shows. A second option would have delayed repayment of the £200, which the Treasury is saying must be repaid at the rate of £40 a year over the following five years.

Third, the business secretary’s officials proposed exempting the poorest homes from the need to repay at all, turning the loan into a grant.

A Treasury spokesperson did not dispute that the proposals had been rejected, after they did not appear in the strategy – which is under fire for failing to offer any immediate help with bills.

Mr Kwarteng admitted it would be at least “two or three years” before new infrastructure investments would have any impact on soaring fuel costs.

The price cap on annual domestic bills leapt by almost £700 this month to nearly £2000, and is expected to soar by up to a further £1,000 in the autumn.

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

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

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

Asked if Mr Sunak had rejected the proposed rethink, a Treasury spokesperson told The Independent: “We are not commenting on leaked documents.”

The leak also revealed that Mr Kwarteng’s hopes of dramatically increasing onshore wind farm investment had also bitten the dust amid the Whitehall wrangling.

The early draft proposed increasing output to 45GW by 2035, saying: “Onshore wind is currently the second-cheapest form of electricity generation.”

But Boris Johnson bowed to pressure from Tory MPs to keep the strict planning rules that act as an effective ban on new onshore wind farms.

Asked why, the prime minister said: “People feel that they affect the beauty of the countryside. I understand that.”