Jeremy Hunt, the former Conservative chancellor, has called for the introduction of a “social tariff” to protect low-income households from a fresh surge in energy costs. The proposal comes as geopolitical instability, specifically the ongoing conflict involving Iran, continues to drive up the price of global oil and gas, threatening to erode the purchasing power of millions of Britons.
The push for a more targeted support system follows data from the Resolution Foundation indicating that typical working-age households could be nearly £500 worse off this year. While the UK government has previously deployed broad support packages, Hunt argues that the current economic climate requires a surgical approach to avoid inflating public debt and damaging long-term growth.
Under the proposed framework, a social tariff would provide discounted energy rates specifically for those in the lowest income brackets. Unlike traditional welfare payments, Hunt suggests this mechanism would allow the government to target support at low-income families “irrespective of whether they’re on benefits or not,” capturing those who may fall through the cracks of current bureaucratic eligibility rules.
The urgency of the proposal is underscored by the volatility of the energy markets. Brent crude has recently climbed back above $100 a barrel, a threshold that typically signals increased pressure on retail electricity and gas bills. For many families, this price spike threatens to wipe out the modest gains made through recent benefit increases and price cap adjustments.
The Economic Cost of Energy Volatility
The financial impact on UK households is becoming increasingly stark. According to research from the Resolution Foundation, the typical working-age household was on a trajectory for 0.9% income growth this year before the escalation of the Iran war in late February. That forecast has since shifted. income could now fall by 0.6%, representing a real-term loss of approximately £480.
The burden is not distributed evenly. While the poorest fifth of the population saw some relief through real-terms benefit increases, their projected income growth for the year has been slashed from 2.8% to just 1.2%. Conversely, a specific subset of the population—families in the bottom half of the income distribution with three or more children—may see a 7.7% increase in income, largely due to the abolition of the two-child benefit limit.
Jonathan Marshall, the foundation’s principal economist, warned that energy bills are likely to rise throughout the summer. This trend threatens to neutralize the average savings of £117 per household that resulted from the regulator lowering the energy price cap in April.
Comparing Energy Support Strategies
| Approach | Mechanism | Primary Goal | Risk Factor |
|---|---|---|---|
| Universal Support (2022) | Broad subsidies for all households | Immediate price cushioning | High public debt/Inflationary |
| Social Tariff (Proposed) | Targeted discounts for low-income | Sustained affordability | Political resistance from 80% |
| Benefit Increases | Direct cash transfers | Poverty alleviation | Lag time in implementation |
Fiscal Constraints and Political Risks
Hunt’s proposal is not without significant political peril. He suggested a “targeted, time-limited” package ranging from £5bn to £10bn for one year, asserting that such a spend would be compatible with the fiscal rules established by Chancellor Rachel Reeves. However, the funding mechanism for such a tariff is where the policy becomes precarious.
Hunt noted that the Treasury must remain mindful of the UK’s precarious fiscal position. He suggested a model where those not eligible for the social tariff would see slightly higher bills to subsidize the lower rates for the poorest. While economically logical, Hunt warned that This represents a “way to kill a policy stone dead” if the government announces that the 80% of the population must pay more to fund the 20%.
This stands in sharp contrast to the 2022 intervention by former Prime Minister Liz Truss, who implemented a universal cushion to protect all households from the price spikes following Russia’s invasion of Ukraine. Hunt argued that the current market environment would not tolerate a repeat of such a massive, universal support package, as the scale of the current price rises is “nothing like 2022.”
The Path Toward Energy Security
Beyond immediate financial relief, industry leaders are calling for a fundamental shift in how the UK powers its homes. Dhara Vyas, chief executive of Energy UK, has emphasized that the current crisis highlights a critical vulnerability in the national infrastructure. She stated that energy security is currently “more at risk now than it has ever been,” urging a faster transition toward clean energy sources to decouple the UK economy from the volatility of global oil and gas markets.
Market analysts remain divided on the short-term trajectory of fuel prices. JP Morgan Chase has forecasted that crude oil will remain above $100 a barrel through June, though they expect an easing in the second half of the year. Meanwhile, Goldman Sachs recently lowered its average forecast for Brent crude to $90 a barrel for the second quarter, down from a previous estimate of $99.
James Smith, chief economist at the Resolution Foundation, cautioned that while de-escalation in the Middle East is welcome, the financial damage to household budgets for the current year is largely already done. He urged the government to act immediately to ensure a social tariff is in place before the winter peak, when the risk of “falling through the cracks” is highest for vulnerable families.
Disclaimer: This article is provided for informational purposes only and does not constitute financial or investment advice.
The next critical checkpoint for energy policy will be the government’s budget announcement in November, where the Treasury is expected to outline its fiscal priorities and determine whether a targeted social tariff will be integrated into the national energy strategy.
Do you consider a social tariff is the right way to handle energy poverty, or should support remain universal? Share your thoughts in the comments below.
