Economists and executives criticised the plans, warning that this “misplaced” Government intervention in the market could backfire.

“I’m perfectly willing to believe there’s a market failure where people don’t know there are cheaper tariffs, or it’s too difficult to switch,” said Julian Jessop, chief economist at the Institute of Economic Affairs (IEA). “But for the Government to arbitrarily decide that the bill is too high and set an explicit cap feels like using a sledgehammer to crack a nut.”

Mr Jessop said that the proposal is “clumsy and counterproductive”. If energy companies knew a cap was coming they could be tempted to push prices higher now, he said, or increase their lower prices to offset the cap at the top end.