Addressing the nationwide energy crisis will be the new Prime Minister’s first and foremost priority. With the new October energy price cap rising to £3,549, and the cap projected to rise to over £5,000 next year, the government is facing growing demands for another round of universal benefits and a freeze on bills. However, in the headwinds of intense inflationary pressures, these measures would further erode household purchasing power and raise the government’s cost of borrowing.

Policy Exchange proposes the Tiered Energy Relief Scheme, a more effective approach based on escalating levels of consumption at a maximum cost £26.6 billion over 6 months, complimented by a targeted welfare package for the most vulnerable households worth £10.7 billion. This program would see the Treasury absorb large portions of the fixed charges and wholesale costs on the bills of lower income families, without overextending support to the wealthiest and most energy-intensive households.

Crucially, this structure would encourage energy conservation and provide deflationary relief, placing the Treasury on stronger footing to lead an economic recovery through 2023 and beyond.