Labour and Conservative proposals to deal with the energy crisis this year “fall well short” of what is necessary, according to analysis by the Resolution Foundation think tank.
The Labour party’s proposal for a freeze on energy bills would extend significant support to households of all incomes. However, the £29bn plan would be poorly targeted, with the richest households receiving £350 more than the poorest households over the course of this winter.
Both candidates for the Conservative leadership have proposed much smaller interventions. Rishi Sunak, the former chancellor, has called for VAT on energy bills to be scrapped and for a lump sum payment of £650 to households on means-tested benefits. Sunak’s plan would target support much more effectively at those on lower incomes, but would save the poorest 10 per cent of households just £429 over the winter (compared with £1,029 under Labour’s plan).
The report also notes that Sunak’s proposals may withhold necessary support from those only marginally above the threshold for means-tested benefits, and that they fail to account for differences in energy usage between households.
Plans put forward by Liz Truss, the Foreign Secretary and current favourite to win the Tory leadership contest, are even more meagre than Sunak’s and more poorly targeted than Labour's. Truss’s plan for the abolition of the green levy on energy and cuts to national insurance would save the poorest households just £92 over winter, while leaving the richest households £936 better off.
The Resolution Foundation’s analysis suggests that monthly energy bills for the typical household will reach £613 in January 2023, a year-on-year increase of 350 per cent. Households face paying almost £1,700 for energy in the first three months of next year, equivalent to 22 per cent of typical post-tax earnings.