Mr Zahawi said the Treasury was preparing new financial support options for the incoming prime minister, including for households not in receipt of benefits and small businesses being rocked by the spike in energy prices.
Regulator Ofgem has confirmed the energy price cap will rise by 80%, which will mean the average household’s yearly bill will go from £1,971 to £3,549 from October.
Businesses, whose bills are not subject to the price cap, are seeing rates rise even higher.
Speaking at a Policy Exchange event in London, Mr Zahawi said of forthcoming support: “You target the help, we need to target those families, those households, who literally have no headroom at all.
“Now, the £37 billion that we are midway through delivering will help so that everyone getting £400 off their energy bills will deal with about 50% of the new energy price cap rise between October and December, but that only delivers between October and December, we need to look at January and then beyond that.
“Why? Because I think we need to send a very clear message to Mr Putin that this strategy is not going to work, that we are going to be resilient, we’re going to put help into households and to businesses so the targeting, I think, is the right approach.”
He also acknowledged there are “no easy options” given the “headwinds” facing the UK, adding: “I think the challenge, as I see it, is … whatever we do has to be operationally deliverable.
“There are some lessons that we’ve learned from the pandemic response. So, on SMEs we’ve got some levers available to us that have worked incredibly well and worked efficiently in terms of getting that help in the short term.
“Then the medium and longer term, so for next winter, for example, I’m already working on these voluntary CFDs (contract for differences) which will help with cushioning some of that shock and, of course, returning to growth is something that we need to focus on.
“All of that has to mean that we really come together and not – if you look at pay settlements – to chase inflation.
“I know everybody is worried, everyone is concerned, more so if you are a senior teacher or a senior nurse on £45,000; I spoke about this the other day – you may not be on benefits, on UC (Universal Credit) but you still need that help, and so I’m looking at all those options of how we help people weather the storm and send a clear a message to Putin that this is not going to work.”
On businesses, he said: “I think the long-term scarring effect on the economy if we allowed perfectly viable small businesses to go under because of the energy price shock that we are encountering would be a mistake.
“That is why we are preparing options for the incoming prime minister to hit the ground running to make sure we deliver not just for households but for businesses as well.”
The winner of the Conservative leadership contest will be announced on Monday, with Boris Johnson set to tender his resignation to the Queen at Balmoral on Tuesday before his replacement steps up.