Millions of vulnerable people will be harmed without radical policies to ease cost of living crisis, leading economists have warned.
Ahead of the announcement of the new energy price cap, the Resolution Foundation thinktank said radical policies such as price freezes, solidarity taxes or lower social tariffs were needed to prevent the cost-of-living crisis worsening.
“Typical energy bills will cost around £2,000 more this year than last year – money that many families simply don’t have,” The Guardian quoted the think tank as saying.
The Resolution Foundation said Liz Truss’ tax-cutting plan “completely misses the target”, while Rishi Sunak’s plan failed to help struggling working families outside the benefits system.
The thinktank called for a new social tariff under which people claiming benefits or where no one in the household earned more than £25,000 would receive a 30 per cent bill reduction.
Alternatively, the Resolution Foundation said the government could announce a universal cut in bills partly offset by a solidarity tax – a one per cent increase in income tax that would fall most heavily on those on higher incomes.
“A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain. We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and build up unmanageable arrears,” Jonny Marshall, a senior economist at Resolution Foundation, said.
Similar calls also came from disability charities and the business lobby group, the British Chambers of Commerce (BCC), which warned of widespread company failures without Covid-style emergency support.
Shevaun Haviland, the director general of the BCC, said she had written to prime minister Boris Johnson, Nadhim Zahawi, the chancellor of the exchequer and both Truss and Sunak expressing concern for businesses and households.
“Today I have written to the prime minister, chancellor of the exchequer and both Conservative party leadership candidates expressing my concern for businesses and households during these challenging times.
“At over 10 per cent, CPI inflation is at a 40-year high, interest rates are seeing the largest increase in 27 years and eye-watering energy bills have created a perfect storm of increasing costs. The impact of these challenges on consumers, businesses and wider society cannot be overstated.”
Last week, the Federation of Small Businesses warned of a “lost generation” of entrepreneurs unless ministers step in with immediate help.
The calls came as the energy regulator Ofgem is preparing to reveal a new price cap for October that is likely to rise from just under £2,000 a year to more than £3,500 a year. The cap was at £1,277 last October, meaning bills will have more than doubled in a year.