# New UK PM must be radical to stop power bill catastrophe – think tank
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK Must Implement Radical Ideas to Cushion Energy Price
Meta Description: Learn how Britain's future prime minister can implement radical measures like discounted power tariffs and solidarity tax hikes to help struggling
URL: https://financedigest.com/new-uk-pm-must-be-radical-to-stop-power-bill-catastrophe-think-tankhtml

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By Humza Jilani

LONDON(Reuters) -Britain’s next prime minister must adopt radical ideas – such as discounted power tariffs, energy bill freezes or a “solidarity” tax hike for higher earners – to cushion the energy price shock for a broad swathe of households, a think-tank said on Thursday.

A day before a latest big jump in power tariffs is due to be announced, the Resolution Foundation said tens of billions of pounds in new government support had to be targeted at households least able to cope with surging energy costs, and ensure that no one needing help misses out.

A catastrophe is coming this winter as soaring [energy bills](https://www.financedigest.com/energy-bill-support-pushes-uk-budget-deficit-to-february-record.html "Energy bill support pushes UK budget deficit to February record") risk causing serious physical and financial damage to families across Britain,” Jonny Marshall, a senior economist at the foundation, said.

The new [prime minister](https://www.financedigest.com/factbox-who-will-replace-uk-prime-minister-boris-johnson.html "Factbox-Who will replace UK Prime Minister Boris Johnson?") will need to think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most.

The front-runner in the race for Downing Street, Foreign Secretary Liz Truss, wants to cut taxes to address the [cost-of-living crisis](https://www.financedigest.com/british-shoppers-defy-cost-of-living-crisis-at-christmas.html "British shoppers defy cost-of-living crisis at Christmas").

But her promise to scrap an increase in social [security contributions](https://www.financedigest.com/factors-contributing-to-negligent-security-situations.html "Factors Contributing To Negligent Security Situations") would give the richest fifth of households twice as much in cash terms as the entire poorest half of households, the Resolution Foundation said in a report.

The plans of her rival, former finance minister Rishi Sunak, to [target support on lower-income households failed to account for families’ differing energy](https://www.financedigest.com/britains-tax-take-risks-blowing-green-energy-off-target.html "Britain’s tax take risks blowing green energy off target") usage and exclude those outside the benefit system.

The foundation proposed options such as a cheap power tariff for low- and middle-income households, a universal 30% cut in the energy [price cap or a one pence-in-the-pound tax increase](https://www.financedigest.com/coca-cola-hbcs-annual-profit-beats-warns-of-price-increases.html "Coca-Cola HBC’s annual profit beats, warns of price increases") for higher-income households.

It also said lump sum [payments that reflect](https://www.financedigest.com/5-predictions-for-payments-landscape-in-2022-and-our-reflections-on-2021.html "5 Predictions for Payments Landscape in 2022 and our reflections on 2021") household size should be considered.

The opposition Labour Party wants a price cap freeze for all households, [funded by a windfall tax](https://www.financedigest.com/uk-drops-plan-to-tax-sovereign-wealth-funds.html "UK drops plan to tax sovereign wealth funds") on oil and gas producers.

The Resolution Foundation said Labour’s measures risked [creating more inflation pressure and forcing the Bank of England to increase interest rates](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created") more aggressively.

[Britain’s government has so far committed more than 30 billion pounds](https://www.financedigest.com/britain-announces-205-million-pound-auction-for-renewable-power-projects.html "Britain announces 205 million pound auction for renewable power projects") ($35.36 billion) in cost-of-living support for households, almost half the cost of its pandemic-era furlough programme to prop up the labour market.

Separately on Thursday, a group representing employers called for immediate pandemic-style [support for companies from the government in the form of emergency grants](https://www.financedigest.com/51-of-brits-support-teresa-may-and-would-grant-access-to-their-personal-communication-and-internet-browsing-history-as-part-of-the-snoopers-charter.html "51%* of Brits support Teresa May and would grant access to their personal communication and internet browsing history as part of the Snooper’s Charter "), and for the reversal of the new, higher social security contributions.

Shevaun Haviland, director general of the British Chambers of Commerce, said the [Bank of England’s recent forecast of a recession](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") lasting from late 2022 until early 2024 added urgency to the calls for help.

“We simply cannot afford to see another month of the same old news,” she said.

($1 = 0.8485 pounds)

(Editing by [William Schomberg and Kate](https://www.financedigest.com/uk-royals-in-u-s-spotlight-as-william-and-kate-visit.html "UK royals in U.S. spotlight as William and Kate visit") Holton)


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