The decision by the Chancellor last year to move some of the policy costs of the green energy transition into general taxation was welcome, cutting the average annual bill by around £150. That’s a permanent cut, but the crisis in the Middle East means the energy price cap will still be heading upwards again in its next quarter from July, putting households under renewed pressure.
As the Tories found to their cost, telling voters their bills are cheaper than they otherwise would have been doesn’t cut the mustard when they are still going up, rather than down.
The crisis sparked by Donald Trump’s disastrous war is a stark reminder that the UK will remain economically and energy insecure until we end our dependence on volatile global fossil fuel markets and the hostile foreign states that control them.
The Prime Minister is right that there can be no return to the status quo. But the new era of clean, secure, home-grown energy will only happen in a way that benefits people and our country if we shape it. The government must move faster and think bigger.
The energy bills support package due to be announced next week must do more than simply cushion the blow. We need action that protects people from short-term global volatility, while leaving us better prepared and more resilient to future shocks. We must show we are fighting people’s corner and have learned the right lessons from the past.
I believe there are five tests that must be met to respond effectively to the scale of the moment.
Firstly, the package must be fair. It must help all those households that are struggling; not just those being supported through the benefits system but a broader group of people like renters and those on low and fixed incomes who we know are most exposed to cost-of-living pressures.
As suggested by the New Economics Foundation, a capped amount of subsidised energy for every household, with additional targeted support for those who need it, is an idea worthy of serious consideration.
Secondly, the support package must safeguard our national security. Since 1970, half of all recessions have been caused by fossil fuel price spikes, something hostile actors like Russia and Iran continue to weaponise against us. Any package must accelerate the drive to get Britain off the fossil fuel rollercoaster once and for all, and deliver a secure energy supply built on renewables. Reforming our broken energy market and severing the link between energy costs and oil prices should be a big part of that.
Thirdly, the package must be economically responsible and financially sound. The Truss-style unfunded spending splurge advocated by the Green Party would see billions in taxpayer cash transferred to the wealthiest households to subsidise their energy costs. That is neither progressive nor fair on the future generations expected to pick up the bill.
The lessons from the Liz Truss debacle could not be clearer, when an open-ended, unfunded, and untargeted energy bills subsidy crashed the economy, pushed up inflation and mortgage prices, and turbocharged government borrowing costs. The Chancellor must demonstrate that the package can be funded through existing means – such as Labour’s windfall tax on excessive oil and gas company profits – or we risk trashing the economy and heaping more pain on ordinary people.
Fourthly, does the package drive economic growth and prosperity? It must be sufficient to safeguard consumer confidence and protect the cost-of-living gains this government has made, so we can keep households spending and our economy going.
Businesses with high energy needs are really struggling, despite many of them having done all the right things when it comes to reducing their exposure and investing in green technologies. Government support is needed to help cut their bills, make the energy transition, and ensure they can maintain their competitiveness, grow, and create jobs. Short-term subsidy is no match for help with the permanent switch to renewable power and permanently lower bills.
And finally, the package must be compatible with our climate goals, by supporting – and not undermining – the drive to decarbonise our homes and our economy. A well-designed programme can incentivise households to cut their energy usage and invest in the green technologies of the future – as many are already doing. We must ignore the reckless and cynical short-termism of Reform and the Tories and double down on Britain’s global climate leadership, which we know can deliver a better future for all of us.
The direction of travel is clear, but the government must be ambitious. All options must be on the table – even those previously dismissed as too radical. That is how we can help the country to weather this storm while building a future of energy security, national resilience, and economic prosperity in an increasingly uncertain world.
This article originally appeared on Politics Home