'Give British households capped amount of cheap energy', think tank urges
The policy would cost £4.5bn but could be funded by windfall profits from oil and gas companies
Taxes from North Sea oil and gas companies could be used to subsidise a portion of energy for British households, a think tank has said.
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The government should provide every household in the UK with a set amount of cheap energy to heat two rooms, run hot water and key appliances like a dishwasher and washing machine, the New Economics Foundation has suggested.
The proposal could see households save more than £160 from their energy bills with those on lower incomes to benefit the most.
It would cost £4.5bn to implement but could be funded by windfall profits expected to be generated by oil and gas companies in the North Sea after a surge in prices following the US-Iran war.
Poorer households would save 17% from their bill while those on higher incomes would save 11%, the NEF estimates, according to the firm.
The think tank said the proposal would hopefully encourage wealthier households to invest in more energy efficient devices like heat pumps.
Read more: Energy bills, fuel, mortgages, food: What the US-Iran ceasefire means for you
The proposal has been used successfully in countries such as Japan, South Korea, China and India and was rolled out by European countries like the Netherlands and Greece after the Russian invasion of Ukraine in 2022, the NEF said.
It comes as the price of petrol at the pump reached its highest level yesterday since the Iran war started on February 28, at 190p a litre.
Oil prices briefly dropped by 15% yesterday after the announcement by Donald Trump of a ceasefire with Iran on Tuesday however have since risen once more amid wariness among investors of the fragility of the settlement.
The price of crude was up by about 3.5% to 98 US dollars a barrel on Thursday morning, from 93.6 dollars on Wednesday.
The NEF proposes that the government freeze an 'essential' portion of energy at the current price cap rate for April-June with households consuming anything greater than this amount to pay additional costs at market rate.
The energy price cap is due to rise by £388 in July and could leave 'dual-fuel' households facing £2,000 a year in energy bills.
Alex Chapman, a senior economist at NEF who wrote the report, said “We’ve barely emerged from one inflation crisis and now we’re being plunged into another. Despite this week’s ceasefire agreement, the aftershocks of this illegal war will hit us hard.
“Russia’s invasion of Ukraine was a lesson in why we need to change how our energy system and energy bills work – but we didn’t listen. Once again, fossil fuel giants and electricity generators are about to rake in mammoth profits while our energy bills go through the roof.
“Let’s not make the same mistake again – this government must protect households’ ability to meet their essential energy needs, and our research suggests they can do so by taxing those who profited the most from this war."