Liz Truss’s economic plans are set to give the UK’s richest households twice as much support for their household bills as the poorest households, a think tank has found.
The Resolution Foundation said Truss’s energy bills freeze and the cut to national insurance means the richest tenth of households will receive £4,700 in support on average compared with £2,200 for the poorest tenth.
Liz Truss used her first week as prime minister to unveil a £150 billion package to freeze the energy price cap at £2,500 until 2024, saving the typical household around £1,000 a year.
Her plan means the price cap will not increase from the current level of £1,971 to £3,549 next month and will instead be limited to £2,500 per year.
The new “energy price guarantee” announced as part of the policy will limit the price suppliers will be able to charge customers for units of gas. It also takes into account Truss’s leadership pledge to temporarily lift green levies off energy bills, which are worth around £150 a year.
The policy applies from October 1 and will also include the £400 rebate off energy bills that was announced by Rishi Sunak when he was chancellor.
The Resolution Foundation said the guarantee was “absolutely the right thing to do” but questioned the funding of the policy, which it estimated could cost around £120 billion.
It said the decision to fund it through government borrowing rather than through further windfall taxes would put the burden on taxpayers.
Less than £1 in every £12 spent on energy support for households will be recouped directly through higher taxes on energy suppliers, it said.
And it warned that lower energy bills could translate into the Bank of England raising interest rates by a further 2.5 percentage points, meaning higher mortgage repayments — although it said this will already be reflected in market interest rate expectations.
Torsten Bell, chief executive of the Resolution Foundation, said: “Last week, the prime minister announced a simply colossal energy support package to prevent a living standards catastrophe this winter.
“The support was big, bold and – together with announcements earlier this year – amounts to over £2,200 for every household in Britain.
“Even so, families should still expect a tough winter ahead, with rich households getting twice as much cost-of-living support as poorer households next year.
“The energy price guarantee was absolutely the right thing to do in terms of providing support where it’s needed.
“But, by ruling out any attempt to fund it through further windfall taxes, the welcome support today could have a nasty sting in terms of higher mortgage payments and higher taxes tomorrow.”