THE Chancellor announced a package of reforms to "radically reduce" energy costs for businesses, especially manufacturing, pledging savings of up to £7 billion by 2018/19 for industry as well as households.

George Osborne said the move will particularly benefit the most energy intensive manufacturers, around 80% of which are based in the North of England, Scotland and Wales.

Measures will include capping the carbon price floor (CPF), which sets rising amounts for the carbon tax paid by electricity generators.

The Government said it was committed to the CPF to stimulate investment in low carbon infrastructure, but will cap the support rate at £18 from 2016/17 to 2019/20 to limit any competitive disadvantage faced by British firms.

The move could save businesses up to £4 billion by 2018/19 and a further £1.5 billion in 2018/19, while shaving £15 off a typical household energy bill.

Compensation for energy intensive users for the cost of the CPF and EU emissions trading system will be extended to 2019/20, while a new compensation scheme will be launched.

The Government said a typical energy intensive business in Britain pays almost 50% more for their electricity than they do in France.

Which? executive director Richard Lloyd said: "A cap on the carbon floor price is a win for all consumers and something we have long called for to take some of the pressure off rising energy bills.

"But more needs to be done. So far more than 43,000 people have signed up to our Fix The Big Six campaign. We are calling for a full competition inquiry so that hard-pressed consumers can be confident that the market works well for them, as well as shareholders, and that the price they pay is fair."

Roy Rickhuss, general secretary of steel union Community, said: "It's good the Government is finally listening. We've been saying for years that industry needed help to reduce its energy costs and now the Chancellor, by his announcement today, has admitted the Government has been getting it wrong.

"Sadly it's too late to save thousands of steel jobs that we've seen disappear in recent years."

Renewable Energy Association chief executive Dr Nina Skorupska said: "By freezing the carbon price floor, the Chancellor is rowing back on his own policy and once again moving the goalposts for investors in green energy.

"Government must explain how investment in renewables is protected from the freeze, or risk undermining the investment required to replace ageing coal power stations with technologies that can keep the lights on without damaging the climate."