Energy price cap rise marks start of ‘living standards catastrophe’ for UK’s poorest people

Today (April 1) the energy price cap rise puts thousands of low-income households at risk of having to go without essentials like food and heating, experts have said.

Ofgem is increasing the cap by 54 per cent, meaning families face paying an extra £700 per year on gas and electricity as the cost of living crisis gathers pace.

Ministers have been criticised for the “shockingly inadequate” support measures created for people in need.

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The energy price cap rise – announced in February and now coming into force – is a “dark day for the UK’s poorest”, said Luke Murphy, associate director for energy at the Institute for Public Policy Research.

“People on low incomes and in the most poorly insulated homes will suffer an enormous hit to their family budgets, and may be forced to miss out on essentials, such as food and heating,” he added.

“So far, the government’s measures to reduce the impact of these bill rises have been shockingly inadequate. To prevent this energy crisis becoming a living standards catastrophe, the government needs to get targeted support to those with the greatest need.

“That means uplifting benefits by 8.1 per cent.”

Ministers have resisted calls to increase social security payments in line with the real cost of living. Benefits will rise by 3.1 per cent this month – based on figures collected in September last year – less than half of inflation levels which economists could predict could hit as high as 8.7 per cent in the coming weeks.

Chancellor Rishi Sunak said this was in part due to a computer system used by the government which creates a “four to five-month lag” on implementing policy decisions, while the prime minister that the government would instead focus on getting more people into work.

“The sad reality is that the situation facing households now needn’t have been anywhere near as bad,” Murphy added. “But decades of inadequate action to decarbonise our energy sources and insulate the nation’s homes have left us dangerously exposed to fluctuating gas prices.”

Experts fear the energy price cap will rise again in the autumn when Ofgem reassesses how closely it reflects global gas prices.

The government will give a £150 council tax rebate to most households this month, followed by a £200 repayable “discount” on energy bills in October. But around five million households are still expected to be pushed into “fuel stress” – meaning they spend more than ten per cent of their income after housing costs on energy – while another 2.5 million could follow later in the year if average fuel bills rise another £500 to £2,500.

Resolution Foundation analysis showed that the financial pressure of expensive energy will be felt most acutely by already-struggling families, people in the North of England and the Midlands, and those in energy-inefficient homes.

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Four in five of England’s poorest households will struggle to afford to heat their homes by October, the researchers said, compared with just one in fifty of the country’s wealthiest households.

“There are no easy ways to protect people from rising bills in the current climate,” said Jonathan Marshall, senior economist at the Resolution Foundation. “But with many of the poorest households missing out on the council tax rebate, this scheme should be used to supplement, rather than replace, support via the benefit system, which is better equipped to target lower-income families.

“Another increase in energy bills this autumn hastens the need for more immediate support,” Marshall added, “as well as a clear, long-term strategy for improving home insulation, ramping up renewable and nuclear electricity generation, and reforming energy markets so that families’ energy bills are less dependent on global gas prices.”