Liz Truss energy bills cap will fail to protect poorest, say thinktanks
Government plans to cap energy bills are “poorly targeted” and will fail to protect low-income families without a package of additional support, charities and thinktanks have warned.
Liz Truss is expected to announce a £90bn package to cap average household energy bills on Thursday, alongside subsidies for small and medium-sized businesses, after concerns the spiralling cost of gas and electricity is on course to push inflation towards 20% next year.
The central plank of the newly installed prime minister’s widely trailed plan is expected to be a freeze on the unit cost of gas and electricity for all households, capping the average bill at about £2,500 a year.
Last month the regulator Ofgem said an increase in the cap would increase the average gas and electricity bill from £1,971 to £3,549 a year, before a possible increase to more than £5,000 in January.
Leading thinktanks said ministers should adopt a scheme that limited the benefit to wealthier households.
Paul Johnson, director of the Institute of Fiscal Studies, described the package as “very poorly targeted” after it emerged high earners with large energy bills will be among those to benefit the most.
He said: “If this is a straightforward bill freeze then the majority of the money will go to better-off people who use more energy. So this is very poorly targeted.
“Finding a way of targeting it to the many, many millions who really need it, without giving it to the many, many millions who don’t, appears to be something that has stumped the Treasury and the government for finding a mechanism of achieving that.”
The National Institute for Economic and Social Research (NIESR) has put forward a “variable price cap” to reduce energy bills for lower-income households in the
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