Falling energy prices will give the government a windfall of nearly £10 billion before the budget and drive down inflation by a further 3 per cent, economists said.
The wholesale cost of gas has fallen to levels last seen before Russia invaded Ukraine last year, meaning that household bills in June will be below the government’s £3,000 energy price guarantee. The forecasts, from Deutsche Bank, suggest that the government will be subsidising household bills for only three months between April and June, saving the Treasury £11 billion.
While this will be partly offset by a new support scheme, analysis suggests Jeremy Hunt, the chancellor, will still have an extra £9.2 billion of headroom.
Ministers are considering whether they can afford to keep the 5p reduction in fuel duty for another year, a move costing an estimated £6 billion.
The Centre for Economic and Business Research, a think tank, suggested that headline inflation would now fall by three points more than it had previously forecast, to 5.5 per cent, by the end of the year. This would help Rishi Sunak meet his pledge of halving inflation by the end of the year.