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The National (Scotland)
The National (Scotland)
National
Adam Robertson

Rich to get 'twice as much' support to help with cost-of-living, think tank claims

A think tank has said rich households could receive twice as much support than poorer ones to help with the cost of living

RICH households will receive twice as much support to help with the cost of living than poorer ones, a think tank has said. 

The Resolution Foundation said if the government cuts National Insurance and limits energy bill rises, richer homes will get £4700 in 2023, compared to £2200 for the poorest. 

Liz Truss announced last week that she would cap the average energy bills at £2500 until 2024. 

The scheme could cost the Prime Minister up to £150 billion, although Truss has refused to put a figure on it, saying “extraordinary times call for extraordinary measures”. 

Under the Government’s Energy Price Guarantee, suppliers are limited in the amount that they can charge for each unit of energy. 

For a typical household – one that uses 12,000 kWh (kilowatt hours) of gas a year, and 2900 kWh of electricity a year – it means they will pay an average of £2500 on their energy bill for the next two years.

Prior to the intervention, Ofgem had announced that the price cap was going to soar to more than £3500, compared to £1277 last winter. 

Chief executive of the Resolution Foundation Torsten Bell said the Government’s support was “colossal” and “bold” but warned families should “still expect a tough winter ahead, with rich households getting twice as much cost of living support as poorer households next year”. 

Liz Truss announced an energy price cap last week

Bell added: “The Energy Price Guarantee was absolutely the right thing to do in terms of providing support where it’s needed.”

The think tank said that the “near-universalist intervention” fitted with previous support offered in the form of a £150 council tax rebate and a £400 energy bill discount. 

It added that targeted help had also been provided for lower-income households through the benefits system but said tax cuts benefitting the richest half of households meant “the total package of government support now in place to support incomes in 2022-23 provides no more support to poorer than richer households”. 

Director of the Institute for Fiscal Studies (IFS) Paul Johnson has previously described the support package as “very poorly targeted”. 

He said: “Finding a way of targeting [support] 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 state intervention is set to be funded by government borrowing as Truss rejected calls to extend a windfall tax on gas and oil company profits, despite calls from the Labour Party, the LibDems and SNP to do so. 

A windfall tax is a one-off tax imposed by a government or company designed to target firms that have benefitted from something they were not responsible for. 

Bell said that by ruling out “any attempt” to fund the government’s new support through further windfall taxes, “the welcome support today could have nasty sting in terms of higher mortgage payments and higher taxes tomorrow”. 

A mini-budget outlining how the Government intends to pay for measures to tackle the cost-of-living crisis is set to take place this month. 

The Department for Business could not offer a comment due to the period of national mourning. 

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