The energy cap freeze is welcome but there is a long way to go

The energy cap freeze is welcome but there is a long way to go

WBG’s response to the energy cost announcement on 8 September 2022

Truss’s energy plan is welcome after a summer of inaction, but it lets energy companies off the hook and still leaves millions struggling with cost of living.

Responding to the Government’s announcement of an energy price freeze, WBG Director Dr Mary-Ann Stephenson said:

‘After a summer of Government inaction, we welcome the announcement that energy prices for the average household will be frozen at £2,500 for the next two years, and that businesses and public services will also see their energy prices temporarily frozen, which will save many from closing and will protect jobs.

But while Truss’s plan will limit the worst impact of energy prices rises, it lets energy companies off the hook. Spiralling profits pose an ideal opportunity for a windfall tax which could be used to support the energy cap intervention. Tax Justice UK reports that a 95% windfall tax on the excess profits of North Sea oil and gas companies could raise up to £44 billion a year for two years[1].

For months, millions, particularly the poorest women,  have been facing fears of having to choose between eating and heating this winter after a 54% rise in energy costs in April and a further 80% projected from October.[2] Although the October rise will now not take place, millions are already struggling with the April price rise – 6.7 million households are currently in fuel poverty[3] – which is now baked in. Energy bills this winter will still be nearly twice as high for the average household compared to last winter, and other essentials like food, transport and housing have all increased. Wages and benefits have not kept pace with inflation – this is a crisis of incomes as well as costs.’

The Women’s Budget group is calling for:

Social security: the cost-of-living crisis is going to last for at least all of 2023 and the support needs to respond to the extension of the crisis. One-off payments will not be enough to stop millions of households from falling into poverty. Benefit uprate must be brought forward to October 2022, in line with current inflation.

Child benefit increased to £50 per week per child, to proportionately support larger families with increasing costs.

End punitive measures, including two-child limit, benefit cap, and deductions.

Windfall tax superdeduction and other tax subsidies to energy producers abolished. This could help pay for support to the most vulnerable.

Energy sector overhaul: an overhaul of the energy sector is needed to prevent two thirds of families in the UK from plunging into fuel poverty by January 2023[4] and end the profiteering from an essential by large corporations.

Deliver a faster climate transition by accelerating rollout of retrofitting and improve energy efficiency of our homes and commercial buildings.

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About the Women’s Budget Group

The Women’s Budget Group is an independent network of leading academic researchers, policy experts and campaigners. Our vision is of a caring economy that promotes equality between women and men.

Download our latest cost-of-living briefing on The Cost Crisis – A Gendered Analysis here.

For more information or further comment, contact sara.reis@wbg.org.uk.

[1] https://www.taxjustice.uk/blog/44bn-a-year-could-be-raised-from-higher-tax-on-oil-and-gas-profits

[2] https://researchbriefings.files.parliament.uk/documents/CBP-9491/CBP-9491.pdf

[3] https://www.endfuelpoverty.org.uk/about-fuel-poverty/

[4] University of York (Aug 2022) More than three-quarters of UK households to be in fuel poverty by the new year, according to new report (https://www.york.ac.uk/news-and-events/news/2022/research/fuel-poverty-uk/)