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The Guardian - UK
The Guardian - UK
Business
Richard Partington Economics correspondent

Liz Truss energy and tax plan ‘will give richest families twice as much support’

Liz Truss
The Resolution Foundation says Liz Truss’s plan to avoid a fresh windfall tax on energy producers will heap the cost on taxpayers. Photograph: James Manning/PA

Liz Truss’s plans for an energy price freeze and sweeping tax cuts will give Britain’s richest households twice as much financial support with living costs as the poorest households, according to a leading thinktank.

The Resolution Foundation said the prime minister’s energy package, announced hours before news of the death of the Queen last week, would come with a “colossal” price tag for taxpayers that was poorly targeted to help those most in need when combined with tax cuts promised in her leadership campaign.

It said the richest tenth of UK households would receive £4,700 in support, on average, from the government’s “energy price guarantee” and cuts to national insurance – far in excess of the £2,200 support for a typical household in the poorest tenth.

The intervention comes as details of the new prime minister’s plan to support struggling households remain unclear, after she chose to hold back from publishing the costings for her proposal until a mini-budget, expected to take place next week.

The Resolution Foundation said the plan to limit an increase in the cost of a typical household energy bill to £2,500 for two years from October would cost about £120bn. It warned that Truss’s plan to avoid a fresh windfall tax on energy producers would mean heaping the cost on taxpayers, with as little as £1 in every £12 spent on energy support for households recouped directly from higher taxes on energy firms.

The thinktank said the average level of support for households would hit £2,000 this year because of the energy price guarantee, as well as financial support for all households and additional one-off payments for those on means-tested benefits. Taken together, it said a similar level of support was provided for rich and poor households.

However, richer households will benefit substantially more next year from plans to reverse national insurance tax increases implemented in April. Alongside the blanket support from the energy price freeze, which will benefit households with the biggest gas and electricity bills, it said this would “skew support towards the very highest-income households”.

Torsten Bell, the Resolution Foundation’s chief executive, 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.”

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