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Energy price rises will affect poorest the most, says the JRF

21 January 2022

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HOUSEHOLDS on low incomes will be the worst-affected by the impending jump in energy prices, research by the Joseph Rowntree Foundation (JRF) suggests.

They will, on average, be spending 18 per cent of their income after housing costs on energy bills after the energy price cap is lifted in April. In single-adult households, it will rise to 54 per cent: an increase of 21 percentage points since 2019-20.

Overall, single parents and couples without children will spend about one quarter of their total incomes on energy bills: an increase of ten per cent. Prices are set to rise by almost 50 per cent, but the proportion of total expenditure for better-paid homes will be considerably less. Some analyists are forecasting a second price rise in October.

The JRF’s figures were released last week alongside the 2020/21 edition of its annual report on poverty in the UK, which showed that the number of children growing up in deep poverty — where household income is so low that it is completely inadequate to cover the basics — had increased by almost 500,000 to about 1.8 million.

The report warns that, without additional support, people already in poverty are likely to find the energy price-rise very difficult to cope with. It says that there is a clear case for targeted protections to prevent serious hardship once the price cap is lifted. The JRF is calling for an immediate emergency payment for people on the lowest incomes.

The JRF’s deputy director of policy and partnerships, Katie Schmuecker, said: “Rising energy prices will affect us all, but our analysis shows they have the potential to devastate the budgets of families on the lowest incomes. The Government cannot stand by and allow the rising cost of living to knock people off their feet. The alarm is sounding loud and clear, and the case for targeted support to help people on the lowest incomes could not be clearer.

“But this must go hand in hand with urgent action to strengthen our social-security system, which was woefully inadequate even before living costs began to rise. Our basic rate of benefits is at its lowest real rate for 30 years, and this is causing avoidable hardship. The Government must do the right thing and strengthen this vital public service.”

On Monday, the think tank the Resolution Foundation forecast that, as a consequence of the price increase, inflation would reach a 30-year high of about six per cent, and the proportion of households struggling with energy bills would triple to more than six million.

Offsetting that would cost the Government more than £7 billion through increases in the annual fuel grant and expanding it to the poorest 8.5 million households, and also by deferring the cost of utility0company failures charged to household bills, and using general taxation rather than energy bills to fund climate-change mitigation.

jrf.org.uk/report/uk-poverty-2020-21

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