Living standards· Incomes· Prices & consumption A chilling crisis Policy options to deal with soaring energy prices 25 August 2022 Mike Brewer Emily Fry Karl Handscomb Jonathan Marshall An imminent jump in energy costs this winter, colliding with temperatures falling and energy use increasing, could have devastating impacts on low-to-middle income households across the country. A number of proposals are already on the table, largely based around fixed payments to households, or reducing the cost of energy. Nearly 80 per cent of domestic gas use happens in the winter months, therefore it is imperative that any policy solution targets energy need as well as household incomes. This report outlines a number of means of delivering on these two accounts, such as implementing a new social tariff that offers lower-priced energy to poorer households, or to recoup some of the deadweight associated with universal energy price reductions with taxes on those on higher incomes. With tens of billions of pounds of costs – or millions of families shivering through the winter – on the line, more action from policy makers is inevitable. Both novel thinking and determined action will be essential to avoid widespread hardship this winter.
