As the new Government prepares to unveil its package of energy reforms, analysis from the Centre for Policy Studies shows the extraordinary potential cost of some of the measures under consideration.
A new briefing note from the think tank, ‘The Bleak Midwinter’, sets out the awful economic impacts of the energy price crisis and the need for extraordinary Government action in response. It examines the measures brought in across Europe and how they compare to the UK, and evaluates the Government’s potential options – including providing estimated annual costings for a potential freeze in the energy price cap. It also sets out the measures Britain should urgently undertake to ensure that there is no repeat of this winter’s energy crisis.
The note shows that:
•Holding energy bills at the April price cap will cost at least £44 billion for households alone, even if energy prices rise no further than the October price cap.
•An energy price cap at the £2,500 level, which has been reported to be under consideration, would cost at least £29 billion – again for households only
•If energy prices reach and remain at the £6,616 level, which Cornwall Insights has warned could be the case by next April, a household price cap would effectively double the current deficit of £115 billion.
•Contrary to some reporting, the UK’s existing packages of support have been broadly comparable to what other European countries are spending. However, we are notable for having done nothing specifically to help business, or to reduce demand for energy. We are also vulnerable to higher energy costs due to the poor quality and poor insulation of much of our housing.
•As well as acting now to help households and businesses, the Government needs to do everything it can to increase energy supply and reduce energy demand ahead of next winter, including more support for onshore wind, solar and fracking, and improved tax incentives for firms operating in the North Sea.
Karl Williams, report author and Senior Researcher at the Centre for Policy Studies, said:
‘The scale of the winter energy crisis has essentially put us on a war footing. The immediate priority needs to be protecting people and their employers from the worst of the energy price shock this winter and next. But whatever ministers choose, there will be a very significant long-term cost.’
CPS - Wednesday, 7th September, 2022
Karl Williams is Research Director at the Centre for Policy Studies. A data specialist with a background in energy and seaborne trade research in the City, his work at the CPS has focused on political economy, energy and immigration.
