Energy bills increase ‘could not be coming at a worse time’ as Universal Credit is cut
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Ofgem is raising the energy price cap by 12 percent, which is expected to hit half the population. The increase is driven by a surge in wholesale fuel costs and from October, default tariff customers (paying by direct debit) will see an increase from £1,138 to £1,277, while prepayment meter customers will see a rise of £153 from £1,156 to £1,309.
The End Fuel Poverty Coalition warned this rise is the “worst in the history of the price cap” and the organisation estimated an additional 488,000 households would end up in fuel poverty as a result.
Simon Francis, a co-ordinator of the End Fuel Poverty Coalition, commented: “This unprecedented hike in energy bills comes at the worst possible time for millions of households across the country.
“It is difficult to put into words just how devastating this news will be for people.
“Especially hard hit will be vulnerable customers and those on pre-pay meters who are unable to switch suppliers and will be facing a winter in abject fuel poverty.
“Switching advice and the price cap may provide some protection from the worst excesses of the energy market, but this will be no comfort to those now facing the stark choice between heating and eating.
“The Government must take immediate action to provide emergency support for those who suffer due to the decision and speed up plans to improve the energy efficiency of the nations’ homes.”
Citizens Advice also warned households will face a perfect storm of energy bill rises and Universal Credit cuts as the autumn approaches.
New analysis from the charity showed energy bill rises will hit family budgets just at the same time as the Government’s planned cut of £20 a week to Universal Credit, which is expected to affect six million households.
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The charity’s research highlighted how the changes will combine to hit families, with soaring numbers of people already behind on their energy bills and millions more reliant on Universal Credit to stay afloat, as the following details:
- The charity estimated nearly two million households are already behind on their energy bills, even before the new price rise and planned Universal Credit cut – an increase of around 410,000 from prior to the pandemic.
- More than one in four (28 percent) households in which someone receives Universal Credit are behind on their energy bill – seven times the rate among households who don’t receive Universal Credit (four percent)
- Nearly a quarter of people (22 percent), equivalent to nearly six million households, already say they are worried about paying their energy bills
- The combined effect of the £20 Universal Credit cut and the rise in energy bills would leave three quarters of Citizens Advice benefit and debt clients unable to cover their living costs
James Plunkett, an Executive Director at Citizens Advice, commented: “This price hike could lead to a perfect storm for families this autumn, hitting people at the same time as a Universal Credit cut and the end of furlough.
“It’s particularly worrying given families on Universal Credit are far more likely to already be in energy debt.
“With bills rising and incomes falling, many families will find it hard to escape. For many, debt will be the inevitable consequence.
“It all adds to the growing case to rethink the government’s planned cut to Universal Credit and keep this lifeline which has been vital to keeping so many afloat.”
Similar sentiment was shared by Peter Smith, a Director of Policy and Advocacy for National Energy Action (NEA), who called for urgent action from the Government.
“This is a devastating increase [to the cap]. Millions of household budgets are already stretched to the limit and this massive increase could not be coming at a worse time,” he said.
“As well as a significant rise in general inflation – driving up spending on other essentials such as food – the new cap level takes effect in October when millions of people will see a reduction in their incomes, as furlough winds down and the uplifts to Universal Credit are likely to be withdrawn. This toxic combination of higher prices, reduced incomes and leaky, inefficient housing, will lead to a further surge in utility debt and badly damage physical and mental health this winter.
“There is far more Ofgem and the UK Government can do to help to protect the most vulnerable consumers this winter. For years Ofgem and [the UK] Government have insisted the way to avoid increases to bills is to switch. Many fixed deals have however come to an end and for some customers switching is impossible due to levels of debt or because pre-pay customers have far fewer options to switch supplier or tariff.
“There may be limited scope to mute the impact of soaring wholesale prices within the cap, but Ofgem can and must provide deeper protection for the most vulnerable customers. The UK Government can also directly help reduce energy arrears as well as maintaining investment to reduce needless energy waste in our homes.”
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