A Living Income and Great Homes Upgrade would solve the cost of living crisis

The UK is plunging into another crisis, this time as a spike in energy prices collides with soaring inflation and lower incomes, to create what the Resolution Foundation is calling the ​‘year of the squeeze’. At NEF, our two flagship campaigns, for a Living Income and a Great Homes Upgrade, offer the long-term answers we need. Now is not the time for tinkering with short-term solutions but to finally address the structural problems that are making our country so vulnerable to economic shocks like these.

Rising global gas prices has prompted the energy regulator OFGEM to raise the energy cap. The cap limits how much energy companies can charge to their customers and it’s gone up by £693 per year. That’s an average rise in energy bills of 54% for people.

Whilst we’re all going to see a squeeze on our bills, NEF’s research has shown it will not be felt equally. The use of average figures masks the fact that single parents, pensioners, and families with one or more disabled people are likely to be hit hardest.

This leaves some families on the brink this winter as they are forced to choose between things like heating their homes or cooking their food to keep energy bills down. Fuel poverty, food poverty, child poverty — whatever you want to call it, it’s poverty and NEF’s own research suggests 32% of the population (21.4 million people) are living below an acceptable living standard (as measured by the Minimum Income Standard).

This isn’t an accident. It’s a direct result of how we’ve structured our economy around low wages and a social security system so inadequate that it leaves families completely exposed to even the slightest of shocks.

This leaves some families on the brink this winter as they are forced to choose between things like heating their homes or cooking their food to keep energy bills down

Meanwhile, we are living in homes which are cold, draughty and leaky — 70% of UK homes don’t meet a good level of energy efficiency. This means one in every four pounds spent on trying to keep our homes warm is wasted trying. The majority of our homes are heated by burning gas, which not only pollutes our communities, but makes us more vulnerable to the volatility of the fossil fuel market.

Until we fix these structural problems we will lurch from crisis to crisis. Yet the government’s response has been the very definition of short term. The Chancellor’s rebate scheme gives people £200 off their energy bills this year but it doesn’t kick in until October. By this point the energy price cap is likely to have risen again, and people need to pay the discount back by £40 a year for the next five years.

There is help between now and October in the form of a council tax rebate of £150 for those in bands A to D in England but this will miss hundreds of thousands of the poorest families that don’t actually pay council tax. With or without the rebate, it pales into insignificance when combined with soaring inflation, benefits cuts, and an upcoming national insurance tax hike, which means families are on average set to be worse off by an eye-watering £1200 in 2022.

Short-term measures are welcome but these are ad hoc, poorly targeted and inadequate compared to the scale of action that we need. It feels inevitable that the government will have to do something more, perhaps in the upcoming Budget in March.

For political reasons it can’t afford not to. April is when the energy price cap increase and tax rises collide, and it would be a kamikaze mission for the Conservatives to go into the May local elections without having taken action to support families, especially since nearly 2 million of the hardest hit families are in Conservative ​‘red wall’ areas. By then we’ll look back on Rishi Sunak’s current offering as laughably inadequate.

The majority of our homes are heated by burning gas, which not only pollutes our communities, but makes us more vulnerable to the volatility of the fossil fuel market

So what should the government be doing? Thankfully, there is a way that we can make sure everyone has enough to make ends meet, and can live in a warm, comfortable home that doesn’t pollute the planet. It comes through a Living Income and a Great Homes Upgrade.

The Living Income is a bold reimagining of income support that will deal with the challenges and opportunities presented by the post-Covid world and economy we’re living in. It is a highly responsive and tailored social security system that combines good jobs with no-strings support when you need it most and, crucially, sets a sufficient level of income below which no one can fall.

By providing everyone with the financial security of an adequate income floor, a Living Income would ensure families are prepared for any sudden price rises or the personal shocks we all face at points in our lives, like losing a shift at work, a child getting sick, or a broken home appliance.

The Great Homes Upgrade is a national mission to upgrade 19 million homes by 2030 that would see every family in a warm home fit for the future. We’re calling on the government to invest £11.7bn in a retrofit revolution to insulate our homes and heat them without using polluting gas boilers, in the process creating millions of new green jobs.

With the Great Homes Upgrade, we’d ensure that when future energy crises come — and they will — families will be using less energy, spending less money, and powering their homes with green energy that keeps the planet cool while their home is warm.

Whatever action the government decides to take, it should move us towards a Living Income and a Great Homes Upgrade. This would begin building the UK’s resilience to inevitable future shocks, whether it’s a Russian invasion of Ukraine, a pandemic, or the climate crisis. In 1962 President John F Kennedy declared: ​“the best time to repair the roof is when the sun is shining”. We can’t wait for sunny days to fix the problems in our economy:, the best time to repair the roof and improve our lives is now.

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