Jeremy Hunt Calls for Social Tariff to Ease Energy Bill Burden
The former Conservative chancellor, Jeremy Hunt, has put forward a proposal for a social tariff designed to assist Britons struggling with escalating energy expenses, driven by the ongoing conflict in Iran. This initiative comes as the Resolution Foundation, a prominent thinktank, forecasts that households could be nearly £500 worse off this year due to increased costs.
Impact of Rising Energy Prices on Household Finances
According to the Resolution Foundation, families are confronting higher bills for gas, electricity, and petrol, with market trends indicating that energy price hikes may push living standards into negative growth. Research reveals that the typical working-age household, which had anticipated a 0.9% income increase before the Iran war began in late February, might now experience a 0.6% decline, equating to a £480 reduction in income.
Oil and gas prices have surged sharply in recent weeks, with Brent crude exceeding $100 per barrel. Despite some benefits increases for lower-income groups, the foundation estimates that the poorest fifth will see only a 1.2% income growth this year, down from a pre-war projection of 2.8%.
Details of Hunt's Social Tariff Proposal
Speaking at a panel discussion hosted by the Resolution Foundation, Hunt emphasized that a social tariff is the most promising approach to provide targeted support to low-income families, regardless of their benefit status. He suggested a targeted, time-limited package ranging from £5 billion to £10 billion for one year, which he believes can be implemented within Chancellor Rachel Reeves's fiscal rules without exacerbating public debt.
Hunt cautioned that if the policy involves raising bills for 80% of households to fund reductions for the poorest 20%, it could be politically untenable. He urged the government to act swiftly, noting that energy bills are likely to rise this summer, potentially erasing the £117 average savings from the recent energy price cap adjustment.
Broader Economic and Policy Implications
The Resolution Foundation's principal economist, Jonathan Marshall, highlighted that energy costs are set to increase, undermining household savings. Meanwhile, James Smith, the chief economist, stressed the uncertainty of the conflict and the need for immediate action to prepare a social tariff for winter, as de-escalation may not reverse the financial damage already inflicted.
Dhara Vyas, CEO of Energy UK, advocated for a shift towards clean energy to reduce reliance on volatile oil and gas markets, warning that Britain's energy security is at unprecedented risk. Analysts, including JP Morgan Chase and Goldman Sachs, predict elevated crude oil prices in the coming months, with forecasts adjusted to reflect ongoing market pressures.
In contrast to the broader financial strain, the foundation noted a brighter outlook for larger families in the bottom half of the income distribution, with the abolition of the two-child limit expected to deliver 7.7% income growth for those with three or more children this year.
Historical Context and Future Outlook
Hunt recalled that the current energy price surge is less severe than the 2022 spike following Russia's invasion of Ukraine, but he warned against expecting another universal support package like the one implemented under former Prime Minister Liz Truss. Instead, he advocates for a focused, equitable solution to prevent long-term economic drag from soaring public debt.
The government faces mounting pressure to address these challenges, with the Resolution Foundation estimating the social tariff's cost at £3.7 billion and urging ministers to accelerate preparations before winter, when energy costs will peak and impact vulnerable households most severely.
