Urgent calls for ‘social tariff’ that could knock more than £1,000 off energy bills for the poorest

The government should consider introducing a "social tariff" for energy bills that could bring down costs for the poorest by more than £1,000 a year, MPs have said.

The intervention comes after experts said the energy price cap could hit £3,244 this October, following the rise of 54% on 1 April 2022 to £1,971.

In a report by the business, energy and industrial strategy (BEIS) committee, MPs said the current package of measures to support people through the cost of living was no longer sufficient as bills are set to spike even higher than previously expected.

They called on ministers to "consider the introduction of a social tariff for the most vulnerable customers".

A social tariff would reduce the price of energy bills for Brits on the lowest incomes, the cost of which would be paid for by taxation or by other customers.

Read more: Energy bills: MPs warn £400 discount not enough to mitigate October rise

MPs highlighted industry experts and stakeholders – including Scottish power boss Keith Anderson and Money Saving Expert Martin Lewis – who have called for such an approach.

In April, Anderson urged the government to reduce the bills of the most vulnerable customers to the price they were last year, cutting costs by more than £1,000.

"I think it's got to the point now where the government in October, for anybody that's deemed to be in fuel poverty or vulnerable, and that will include pre-payment meter customers, a £1,000 payment should be taken off their bill and put into a fund," Anderson said in April.

"That fund can then be repaid over a 10-year period across the rest of the customer base."

He warned that the spike in energy costs in autumn would be "horrific".

In the report, MPs said existing help announced by then-chancellor Rishi Sunak in May is already out of date.

"The government's May 2022 support package is welcome but will now be eclipsed by the scale and longevity of the price increases, and we are concerned that public funds are still not being targeted adequately enough to those who need it the most," they said.

Read more: Some renters to miss out on £400 energy discount, experts warn

Sunak announced a £15bn package of financial support in May to support families incomes facing soaring energy bills.

At the time, Ofgem predicted that the price cap would hit £2,800 in October.

The measures included £400 off each households' energy bills, and £650 for people who claim means-tested benefits.

Responding to the report, stakeholders urged the government to implement the committee's recommendations.

A spokesperson for the End Fuel Poverty Coalition said the soaring energy bills is creating a "nightmare scenario" heading into winter, and called on Boris Johnson's successor to act.

"MPs are right. The crisis facing millions of homes as energy bills continue to soar is ongoing and severe," said a spokesperson for End Fuel Poverty Coalition.

"The energy bills crisis this winter is a nightmare scenario, but the government is sleepwalking into it.

"Tory leadership hopefuls and ministers need to wake up and announce urgent financial support to offset the predicted price rises this winter and further help vulnerable homes stay warm this winter."

National Energy Action (NEA) also called on the government to act on the recommendations from the report "urgently".

Read more: Rishi Sunak vows to cut VAT on household energy bills

"We also agree with the cross-party recommendation to introduce a social tariff to give fuel-poor households deep, enduring protection against persistent high energy prices, and putting in place a new scheme to help households that have accrued a mountain of debt during the crisis."

MPs also criticised Ofgem more broadly in their report over their management of the energy crisis which saw multiple energy suppliers collapse and left customers footing the bill.

"Ofgem granted energy suppliers a licence to operate in the market without ensuring they had access to sufficient levels of working capital, an acceptable business plan, or were run by individuals with relevant expertise," the report said.

It added: "Ofgem’s negligence has contributed to higher energy bills, which is in complete contradiction to its mandate to act in the interests of consumers."

It comes as pressure grows on leadership hopefuls Sunak and Liz Truss to commit to new cost-of-living support amid the incoming winter crisis.

On Monday, the foreign secretary committed to tax cuts to provide relief to families struggling with the cost of living - and on Tuesday Sunak pledged to slash VAT on energy bills.

Watch: Inflation and cost of living crisis: Why is everything more expensive and will prices rise?