Rich households could receive twice as much support as poorer ones under new measures aimed at tackling the cost of living crisis, according to a thinktank.

Last week, Liz Truss, the prime minister, announced plans to freeze average annual energy bills at £2,500 until 2024, a move that would replace the previously announced October Ofgem price cap of £3,549. Last winter, Ofgem’s price cap was set at £1,277.

However, the Resolution Foundation has now estimated that the energy price freeze, combined with Truss’s planned cut to National Insurance, will mean that the richest tenth of UK households could receive £4,700 in support in 2023. The poorest tenth, meanwhile, would only receive £2,200.

The people who stand to gain most from the policy are those who spend the most on bills, and they tend to be wealthier and living in larger homes. People on lower incomes, who are likely to be most concerned about the cost of living crisis, will save less as a result of the freeze: although a higher proportion of their household budget will be allocated to bills, the amount they spend in total is less. 

Under current plans, the price freeze is expected to be funded by an increase in government borrowing.

The thinktank estimated that the plans would cost around £120 billion, and warned that without the introduction of a windfall tax on energy companies, taxpayers would foot the bill in the long run, with just £1 in every £12 spent on the energy support plan set to be recouped from higher taxes on those firms.

“Last week, the prime minister announced a simply colossal energy support package to prevent a living standards catastrophe this winter,” said the Resolution Foundation’s chief executive Torsten Bell.

He went on to describe the energy price guarantee as “absolutely the right thing to do in terms of providing support where it’s needed” but noted that “families should still expect a tough winter ahead, with rich households getting twice as much cost of living support as poorer households next year”.

He added: “By ruling out any attempt to fund it through further windfall taxes, the welcome support today could have a nasty sting in terms of higher mortgage payments and higher taxes tomorrow.”

Paul Johnson, the director of the Institute for Fiscal Studies, previously stated that the plans to tackle the cost of living crisis were “very poorly targeted”.

“Finding a way of targeting [support] to the many, many millions who really need it, without giving it to the many, many millions who don’t, appears to be something that has stumped the Treasury and the government for finding a mechanism of achieving that.”

Truss is expected to reveal more about costings for the plan in a mini-budget expected to take place next week, after the period of mourning. 

Measures introduced to tackle the cost of living include a £400 energy bill discount for each household (which is factored into the price freeze), a £150 council tax rebate and a £650 payment made in two instalments to households on means-tested benefits. 

Stylist contacted BEIS for comment and they responded with the following:

“The Energy Price Guarantee means that from 1 October a typical UK household will now pay an average £2,500 a year on their energy bill for the next two years.

“It will save the average household around £1,000 a year based on current energy prices from October and is in addition to the £400 energy bills discount for households through the Energy Bills Support Scheme.

“The most vulnerable UK households will continue to receive £1,200 of support, announced earlier this year, provided in instalments over the year. All other support payments promised for this Winter will remain in place.

“We will also be holding a fiscal event later this month to support people further. The date will be announced in due course.

“Example savings based on the type of home are available in our factsheet.

“We are also investing £6.6 billion this parliament to improve energy efficiency across the country, with the majority of our support targeting those on low incomes and vulnerable households. This is benefiting tens of thousands of homes and delivering average savings of £300 a year on energy bills.”

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