The energy price cap will be frozen at £2,500 for another three months to help householders with the cost of living crisis, Rishi Sunak has confirmed.
Chancellor Jeremy Hunt will formally announce the U-turn in his Budget later today.
Average bills had been due to increase by another £500 from next month under the government’s energy price guarantee.
But in a statement this morning, Sunak said: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the energy price guarantee at its current level until the summer when gas prices are expected to fall.
“Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.”
Treasury officials said extending the energy price guarantee until July - when experts forecast that wholesale prices will come down - would save the typical household around £160.
Hunt said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
The chancellor will also use his Budget to announce a massive expansion of free childcare in an attempt to encourage parents back to work.
He will also confirm that corporation tax is increasing from 19% to 25%, as well as a £5 billion spending boost for the Ministry of Defence and a huge hike in alcohol duty.
In his statement this lunchtime, Hunt will tell MPs he is delivering a “Budget for growth”.
“In the autumn we took difficult decisions to deliver stability and sound money,” he will say.
“Today, we deliver the next part of our plan: a Budget for growth - not just growth from emerging out of a downturn, but long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people, all whilst making our country one of the most prosperous in the world.
“Today I deliver that by removing the obstacles that stop businesses investing, tackling the labour shortages that stop them recruiting, breaking down the barriers that stop people working and harnessing British ingenuity to make us a science and tech superpower.”