Ahead of the announcement of a new energy price cap tomorrow, the Resolution Foundation thinktank said radical policies such as price freezes, solidarity taxes or lower social tariffs are needed to prevent the cost of living crisis from worsening. Pressure on the government to act also came from disability charities and business lobby group British Chambers of Commerce, which warned of widespread company failures without Covid-style emergency support. The BCC said time was running out as it outlined a five-point plan to cushion the impact of rising energy costs. The calls came as energy regulator Ofgem prepares to unveil 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. Labor said neither Liz Truss nor Rishi Sunak had made serious proposals after rivals to succeed Boris Johnson rejected calls by the head of Scottish Power for a two-year freeze on £100bn of energy bills. Sunak said he was “nervous and skeptical” about the plan, while a government source close to the Truss campaign said the proposal was “irrelevant” because both candidates had ruled out a price freeze. Families caring for a disabled child or adult have been left “frustrated” by the cost of living crisis, with more than 70% going into debt, according to research for national disability charity Sense. Four in five (83%) disabled households said the government was not doing enough to help. The Resolution Foundation said the Truss tax cut plan “completely misses the mark”, while Sunak’s plan failed to help struggling working families off the benefit system. The thinktank said: “Typical energy bills will cost around £2,000 more this year than last year – money that many families simply don’t have.” He 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% bill cut. Alternatively, the Resolution Foundation said the government could announce a across-the-board cut in bills that would be partly offset by a solidarity tax – a 1% rise in income tax that would fall more heavily on higher earners. Jonny Marshall, senior economist at the Resolution Foundation, said: “Disaster is coming this winter as rising energy bills risk causing serious physical and financial damage to families across Britain. We are on track for thousands to see their power completely cut off, while millions will be unable to pay bills and create unmanageable delays. “The new Prime Minister will have to think the unthinkable in terms of the policies needed to get sufficient support where it is needed most. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. “Significant additional support should be targeted at those most exposed to rising bills and least able to cope with them, and be watertight so no one falls through the cracks. But none of the proposals from the leadership candidates or opposition parties currently do so. “An innovative social tariff could provide wider targeted support, but comes with huge delivery challenges, while freezing the price cap gives too much to those who need it least. This problem could be overcome with a solidarity tax on high earners – an unthinkable policy in the context of leadership debates but a practical solution to the reality families face this winter.” Shevaun Haviland, the BCC’s director general, said she had written to Johnson, Chancellor of the Exchequer Nadhim Zahawi and both Truss and Sunak expressing concern for businesses and households. “I have today written to the Prime Minister, the Chancellor of the Exchequer and the two Conservative leadership candidates expressing my concern for businesses and households in these difficult times. “At over 10%, CPI inflation is at a 40-year high, interest rates are on their biggest rise in 27 years and sky-high energy bills have created a perfect storm of rising costs. The impact of these challenges on consumers, businesses and wider society cannot be overstated.” The BCC said companies could not afford to wait another month without practical support measures in place as it called for a temporary cut in business VAT from 20% to 5%, the same rate domestic users pay, a government Covid-style emergency energy grant to subsidize costs for small and medium-sized businesses and temporary reversal of the increase in national insurance contributions. Across the UK, hundreds of small traders are closing their doors as energy contracts expire and they are quoted unaffordable prices for new energy deals. The Federation of Small Businesses has warned of a “lost generation” of entrepreneurs unless ministers step in with immediate help.
