Leading economists have warned that if the government fails to take urgent action by cutting energy bills to prevent a catastrophe expected to happen by winter, it will negatively impact millions of vulnerable families.
The Resolution Foundation think tank, leading up to tomorrow’s announcement of the new price cap for energy, said that to prevent the cost of living crisis from getting any worse, radical policies were needed, including solidarity taxes, freezing prices, and lower social tariffs.
The UK government is under pressure from disability charities and the British Chambers of Commerce (BCC), a business lobby group, to take action. The BCC said it was about to introduce a five-point plan, but the time was running out to mitigate the impacts of continuously increasing energy costs.
The warning was given after Ofgem; the energy regulator, worked on releasing a new price cap for October, which is anticipated to increase by over £3,500 per year from just under £2,000 per year. In October 2021, the price cap was at £1,277, which indicates that it has increased by double in just a year.
Labor said that Rishi Sunak and Liz Truss haven’t figured out a solution to avoid the crisis after their rival, former prime minister Boris Johnson rejected a proposal by the head of Scottish Power of freezing energy bills for two years at the cost of £100 billion.
As per the research carried out for Sense, a national disability charity, due to the ongoing cost of living crisis, families are left frustrated as they worry about their children or adults with disabilities, with more than 70% of families falling into debt. Around 83% of disabled families agreed that the government is not taking sufficient steps to help them in this crisis.
According to the Resolution Foundation, a tax-cutting plan proposed by Truss has failed to reach its target. At the same time, Sunak’s idea could not help struggling working households except through the benefits system. The Thinktank said that, compared to last year’s energy costs, it would cost almost £2,000 more this year.
It proposed a new social tariff plan which suggests that people who apply for benefits and those with no family members earned over £25,000 would get an energy bill reduction of 30%.
On the other hand, the Resolution Foundation said that the government might possibly announce a universal cut in energy bills which a solidarity tax will offset to some extent; this means that an increase of 1% in incomes would decline mainly for people with higher paychecks.
Jonny Marshall, a senior economist at Resolution Foundation, said that the new prime minister needs to work on aspects that will provide ample support to most needed areas.
Shevaun Haviland, the director general of the BCC, said that she had written to Truss and Sunak, Johnson, and Nadhim Zahawi, the chancellor of the exchequer, to express her worries about families as well as businesses during this difficult time.
“At over 10%, CPI inflation is at a 40-year high, interest rates are indexing the largest increase in 27 years, and eye-watering energy bills have created a perfect storm for increasing costs. The impact of these challenges on consumers, businesses, and the wider society cannot be overstated,” she wrote.
The BCC said that it would not be beneficial for companies to wait for another month without receiving any practical support measures, as it required a cut in VAT, from 20% to 5%, in the short-term for businesses