Extending the Warm Home Discount will help more vulnerable families cope with soaring energy bills
New year, new crisis. That’s the conventional wisdom of the commentariat, although the likelihood that 2022 would be a year of high inflation has been obvious for many months.
A combination of rapidly rising world energy prices and the laxity of the Bank of England’s stance on monetary policy has guaranteed that.
Attention has now turned to the government, with demands for subsidies, tax cuts and bailouts from all sides. The Chancellor is sensibly refusing to panic, since he is faced with the inexorable maths that any extra spending must come from either extra borrowing or cuts elsewhere.
5 per cent VAT off fuel prices would give most help to those who need it least
My suggestion is that any extra help given to mitigate the pain should try to achieve two things. It should be targeted at those who most need help, and it should seek to achieve long-term good at the same time. As a coda, I would urge that the government resists calls to change direction on any of its central policy areas, especially if they were manifesto commitments. A sense of direction is essential.
What does this mean in practice? On the energy front, Labour’s call to take the 5 per cent VAT off fuel prices would fail my first test. It would give most help to those who need it least. A more promising area to explore is an extension of the Warm Home Discount. This is currently a relatively modest measure giving £140 help to around 2.2 million people, including pensioners. Increasing the help given, and extending eligibility, for example, to those receiving Universal Credit, would mean that the extra spending would be properly targeted.
Another energy-related suggestion, which would meet my second test, would be an ambitious insulation programme for all homes which are poorly insulated.
There have been various such schemes in the past and their usefulness has been frankly variable, but the principle is unarguable. It would help individual families reduce their energy bills, and it would reduce our carbon emissions.
Home insulation is sadly a policy area designed to turn off those who seek political drama and spectacle, but it has never been more important. It may just be that this year’s crisis elevates it to a position where serious improvements are possible.
To meet my subsidiary point about avoiding big U-turns, I would encourage Ministers to resist calls to abolish the so-called “green levies”. Doing this only a few months after the successful COP26 conference would be the clearest possible signal to the rest of the world that the UK did not take its own commitments seriously. This in turn would give permission to inveterate backsliders to ignore their own commitments, and it would turn that success into a failure.
Those arguing for an end to our commitment to net-zero by 2050 would be arguing this whether or not energy prices were rising fast. They have seized on the price rises as a weapon in a battle they would be fighting anyway. The government, and indeed the Conservative Party, has consistently been on the other side of that battle, ever since Margaret Thatcher was the first world leader to take the environment as a vital issue. It would be a historic error to change our position now.
Looking ahead the route back to a lower-tax economy which would ease pressures on households involves a genuinely competitive energy sector which provides reliable decarbonised supplies. In other words, we need to combine our drive for renewables with an equal drive for new nuclear power. This problem can’t be fully solved this year, but we can take a number of important steps forward.
Damian Green is the Conservative MP for Ashford.
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