According to the think tank, the cap on energy consumption should be replaced by a “free basic” plan, which means that households will receive an allowance before being charged.
According to the New Economics Foundation, every household in Britain should pay part of their electricity bill at the expense of the government to help protect the poorest families.
His report proposes that households could pay for their energy consumption up to a certain level, helping the least well-off to stay warm – which would be funded by the government.
Meanwhile, those who use more than the set limit will be charged a higher price to encourage energy efficiency and reduce consumption.
Another kind of hat? NEF says every household should have Energy Benefit – after that point they should be charged a higher rate
The NEF said a three-pronged approach was needed, including reforms to benefits and lump-sum payments for all households, to help the poorest households hit by bill shocks and protect vulnerable households from the coming recession.
The think tank is proposing a cap of 8,000 kilowatt-hours per year of non-gas and 2,000 kWh of electricity, which, based on current price estimates for April 2023, amounts to just under £4,600 of free energy per household.
Once this is used up, households will be billed higher as a penalty for high consumption.
The proposal comes as the number of households in arrears on utility bills rose by almost 15 percent between April and June to 2.7 million.
One in ten households are now expected to struggle with the cost of their electricity bills, with a further 295,000 reported to be unable to pay their bills.
It follows a previous increase in Ofgem’s price cap from £1,277 to £1,971 in April, with millions more worried they will be without vital financial support this winter as the price cap rises to £3,549 in October.
According to new data released by credit reference agency Equifax, the number of households missing one or two accounts for the first time rose by a significant 22 percent over the next three months.
Paul Heywood, head of data and analytics at Equifax UK, said the figures were a warning sign of what was to come.
He said: “The most alarming signal in all of this is the early delinquency figures, households falling behind with their utility bills for the first time between April and June this year.
“These early missed payments will quickly turn into several more if swift action is not taken to provide individual support.
“This is not the time to point fingers, we all know someone who is worried about how they will cope this winter and we all need to think of ways to help.
“From the government, we need swift financial support and protection for low-income households, as we have seen with mortgage holidays and other forbearance measures during the pandemic.
“With warnings from energy suppliers that energy prices could remain high for several years, now is the time to come together, collaborate and innovate, or we will be left with a financial legacy that will last long after these high prices.”
Future Prime Minister Liz Truss has promised to announce how she plans to support Britons with their electricity bills.
Experts have suggested this could include freezing electricity bills to help contain rising prices, which are expected to leave millions of people unable to pay for their utilities this winter.
“We need a sustainable solution”
The NEF – which claims to promote “social, economic and environmental justice” – says its Free Baseline Energy plan is due to launch next year to replace Ofgem’s price cap.
It also said the government could raise £22bn through a windfall tax on oil and gas producers.
This means the proceeds could be used to pay for a new ‘living allowance’ of up to £750 per household.
Alfie Stirling, director of research and chief economist at NEF, said the emergency freeze on the price cap was necessary to buy time, but it was not viable for more than a few months.
“We need a sustainable solution that combines lower energy bills, incentives and support for energy efficiency and an ever-stronger income safety net,” he said.
In addition, the think tank says a new “energetic element” could be added to Universal Credit to help cope with rising bills for those most struggling.
An extra £1,000 for single people and £1,650 for married couples can be put into Universal Credit and Inheritance Benefit to cover the cost of higher bills that exceed the entitlement to free energy.
Labor has promised to freeze the energy price cap at the level set in April – just under £2,000 a year.
However, the NEF has warned that this plan cannot be sustained beyond the coming winter.
Freezing energy prices is expected to cost £29bn under the Labor plan, but the NEF said when combined with rising wholesale energy prices, it could end up costing more than £100bn a year.
It says the total cost of his package will be around £46.2bn and claims it will be cheaper in the long run than Labour’s energy price freeze.
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