The Chancellor is said to be preparing a £1billion bailout for soaring energy bills at the Budget – but the bulk will go to benefits claimants.

John Healey has been scrambling for ways to ease the pressure on consumers on October 28, despite facing a battle to balance the Government's books.

Ministers are increasingly alarmed at the prospect of the energy price cap rising by more than a fifth in January amid the raging Middle East crisis.

But the proposal reportedly gaining traction in the Treasury would see the Warm Homes Discount increased from £150 a year to £250 a year, funded from taxes.

That is only available to households on means-tested benefits, such as universal credit or housing benefit.

According to The Guardian, Mr Healey has ruled out a call from Net Zero Secretary Miatta Fahnbulleh for all levies on energy bills to be shifted to general taxation. That would have cost more than £3billion.

The Treasury insisted the claims were just speculation three weeks ahead of the Budget. 

Andy Burnham has made great play of his desire to help families with the cost of living. However, his previous move to trim 5 per cent VAT off electricity bills until March was immediately swallowed up by a rise in the cap this month.

The Chancellor is under huge pressure with markets driving up UK borrowing costs and Labour promising a host of other big-spending policies.  

Mr Healey will have to lay out how around £5billion for the Defence Investment Plan will be found, as it was not funded when the plan was announced under Keir Starmer. 

But there will be no wider timetable for increasing defence spending to 3 per cent and then 3.5 per cent of GDP.

Those crucial decisions have been delayed, potentially until the end of next year when a spending review will be held. 

That is despite Mr Healey quitting Sir Keir's government in protest at the failure to set out a path for defence spending. 

Banks fear they will be targeted with a windfall levy as Labour tries to rustle up cash for more support.