The Resolution Foundation published a report, "A chilling crisis", on 25 August 2022 setting out policy options for dealing with rising energy prices. The report, whose authors include Mike Brewer, Emily Fry, Karl Handscomb and Jonathan Marshall, argues that any policy solution must target energy need as well as household incomes, noting that nearly 80 per cent of domestic gas use happens in the winter months1.
The report states that a typical household faces bills £2,000 higher in 2022-23 than the year before, and that monthly energy costs are set to peak at £613 in January. It says this will be unaffordable for many, but presents the biggest risks to pre-payment meter customers who are unable to spread these costs over multiple months1.
On the design of support, the report sets out two routes. The first is a social tariff, which it describes as potentially the ideal solution, with a 30 per cent discount for low-to-middle income households offsetting the increase in energy costs since Ofgem's prediction of a £2,800 annual price cap in May1. The second, if there is no time to implement a social tariff, is lowering energy prices for all and recouping some of the cost, and reducing what would otherwise be large gains to better-off families, through an additional 1p on all rates of income tax1.
"This report outlines a number of means of delivering on these two accounts, such as implementing a new social tariff that offers lower-priced energy to poorer households"
The report states that no proposals from Government or opposition parties at that point managed to solve what it calls the twin targeting challenge of accounting for both household incomes and energy need1. It does not set out a timetable for any of its proposals, and no decision by government on either option is reported in the document.
Why it matters for households
The report's central point is that help with bills can be delivered in two different ways, and the choice affects which households gain. A social tariff would lower the rate paid by qualifying households, so the discount attaches to the energy a home uses rather than to the household's bank account. A universal price reduction would lower bills for every household, with the cost recovered through income tax, so better-off families would pay some of it back1.
For a household's energy independence, the distinction matters in how far a discount shields a home from the price of the energy it actually consumes. A tariff discount scales with use, which matters in winter when gas demand is highest; a fixed payment does not. The report notes that pre-payment meter customers face particular risk because they cannot spread costs over several months1. The energy price cap is the mechanism the report's £2,800 figure refers to, and the social tariff proposal sits within the wider regulation and policy landscape for household energy.
What happens next
The report contains no dated next steps. It states that more action from policy makers is inevitable given the scale of the costs involved, and that both novel thinking and determined action will be essential to avoid widespread hardship this winter1. No government response to the report is set out in the document.
Sources1 cited
- A chilling crisis • Resolution Foundation, resolutionfoundation.org