Liz Truss’s new government has moved to cap energy bills at an average of £2,500 per year until 2024 in a bid to mitigate the impact of rising energy costs.
Annual bills were previously due to rise from £1,971 to £3,549 for the typical household in October.
However Truss has rejected calls to introduce a windfall tax on gas and oil company profits to pay for the package, despite energy firms BP, Centrica and Shell all announcing record profits.
The cost to the taxpayer could therefore be around £150bn.
Keir Starmer, leader of the opposition, responded: “Every pound the government refuses to raise in windfall taxes … is a pound of extra borrowing. It’s that simple.”
The measure will work by capping the unit price, meaning household energy bills will still vary according to how much gas and electricity people use.
Businesses will also get a reduction for a shorter period of six months.
Ahead of the announcement, Truss said: “Putin’s war in Ukraine and weaponisation of gas supply in Europe is causing global prices to rise – and this has only made clearer that we must boost our long-term energy security and supply,” she said.
She vowed to “tackle the root cause of these problems, so that we are not in this position again”.
Torsten Bell, chief executive at the Resolution Foundation, said: “Households should be reassured that the winter ahead will not be as bad as feared, but policy makers need to recognise it will still be very tough indeed.
“The energy price guarantee does a good job of targeting those households facing the highest energy bills but, because it is not well targeted at those on low and middle incomes, comes with a large price tag.
“Liz Truss is asking future taxpayers to pick up a large and very uncertain bill on behalf of today’s energy bill payers, but declined to set out the cost of this huge package.
“It could end up surpassing the bank bailouts at the height of the financial crisis, with new support for households alone on course to total around £120 billion. It goes without saying this can’t be the permanent answer to higher energy bills.”
Charities reckon Liz Truss’s energy support package should do more to target the poorest households.
Becca Lyon, the head of child poverty at Save the Children, said: “How can it be right that multimillionaires will get the same support as the most vulnerable families?
“If there is enough money to pay the energy bills of the rich and not ask energy giants to pay a penny more, surely there should be enough money to make sure no family has to choose between heating and eating this winter.”
Imran Hussain, the director of policy and campaigns at Action for Children, said: “We desperately need more targeted help through benefits for the low-paid and those who have lost their jobs or cannot work because of disability, illness or caring responsibilities.
“Even with a freeze, energy bills will still be double what they were a year ago, the price of other essentials continues to soar and the true value of benefits has been cut.”