Energy and Environment

Scrap the energy price freeze plan in favour of targeted welfare and tax cuts

Commenting ahead of tomorrow’s energy bills announcement, Andy Mayer, Chief Operating Officer and Energy Analyst at free market think tank the Institute of Economic Affairs, said:

“Targeted welfare and tax cuts are better than price freezes.

“The expected energy price freeze, which will limit typical bills to between £2-2,500, is estimated to cost between £90-£170bn. It would be better and cheaper to focus on targeted welfare and tax cuts.

“Price controls don’t work. By suppressing the price signal and subsidising energy use, more energy will be used, inefficiently, prolonging the crisis, and limiting investment in energy saving.

“Support will be untargeted, encouraging executives to heat their swimming pools, as much as helping those facing a choice between heating and eating.

“Alternatives include:

• Boosting Universal Credit and equivalent legacy benefits by 40 per cent, helping the vast majority of working-age low-income households, at a cost of £32bn

• Raising the Warm Homes Discount to £1,000 and doubling scope, helping five million households in winter, at a cost of £5bn.

• Removing 5 per cent VAT from energy bills, helping everyone, at a cost of £4bn.

• Cutting all VAT from 20 per cent to 16 per cent, helping everyone, at a cost of £30bn.

• Cutting the basic rate of income tax from 20 per cent to 19 per cent, helping working families, at a cost of £5bn

• Cutting employee national insurance from 13.25 per cent to 11 per cent, helping working families, at a cost of £9bn

• Cutting business rates by 20 per cent, helping businesses, at a cost of £5bn.

“If all measures were taken this would also cost £90bn, but efficiently. It would leave the choice on how to spend the uplift to individuals, while continuing to incentivise energy saving.”


Notes to editors

Contact: [email protected] / 07763 365520

IEA spokespeople are available for interview and further comment.

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