New PM should provide ‘radical’ energy support, says think tank

A social tariff could help millions through a painful winter, the Resolution Foundation said.

Millions of households will struggle with their energy bills over the next year (Steve Parson/PA) (PA Wire)

The new prime minister needs “radical” support for energy bill payers or people will be put in physical danger, a report has said.

The Resolution Foundation said that families’ physical and financial health are under threat this winter, and urged the new Government to “think the unthinkable”.

The energy price cap is forecast to rise above £3,600 for the average household from the start of October.

It could then top £5,000 in January, and rise above £6,000 in April, according to the latest forecasts.

The new prime minister will need to think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most

Jonny Marshall, the Resolution Foundation

Even with the support that has already been announced, the four million households in the UK with pre-payment meters will be spending around 44% of their monthly disposable income on bills during the depths of winter.

Their energy costs might be around £613 during the month of January alone, the report said.

Thousands of people could see their power cut off if they are unable to pay for it up front, while millions of direct debit customers could fall behind on their bills and shred their credit ratings.

The number of families falling behind on at least one utility bill increased from 9% in October 2021 to 14% in June.

“A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain,” said Jonny Marshall, a senior economist at the Resolution Foundation.

“We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and (will) build up unmanageable arrears.

“The new prime minister will need to think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most.

“Significant additional support should be targeted at those most exposed to rising bills and least able to cope with them, and be watertight so that no-one falls through the cracks.

“But none of the proposals from the leadership candidates or the opposition parties currently do this.”

In a report, the foundation found that the plan by Conservative Party candidate Liz Truss to reverse national insurance rises would benefit the fifth richest households by twice as much as the poorest half.

It said her rival Rishi Sunak’s plan to push £5 billion to the poorest households would focus help closer to where it is needed.

But this approach is also risky because it does not account for the different amounts of energy that different low-income families might need. It also does not help families outside the benefit system.

If a family earned £1 too much to qualify for Universal Credit it would mean they lose out on £1,300 of support.

It called for the Government to introduce a new social energy tariff for low and middle income households.

This could be funded by a “solidarity tax”, which would add 1% to all income tax rates.

“An innovative social tariff could provide broader targeted support but involves huge delivery challenges, while freezing the price cap gives too much away to those least in need,” Mr Marshall said.

“This problem could be overcome with a solidary tax on high earners – an unthinkable policy in the context of the leadership debates, but a practical solution to the reality facing families this winter.”