Britain’s poorest households are risking spending nearly half of their disposable income on gas and electricity bills this winter despite the government’s energy price guarantee, a report says.
The Progressive Economics Forum (PEF) said the poorest tenth of households could face bills of up to 47% of their disposable income this winter, even after taking subsidies from Liz Truss’ energy price guarantee into account.
The analysis comes as Chancellor Kwasi Quarting prepares to use his mini-budget on Friday to launch sweeping tax cuts targeting middle- and high-income workers as well as a freeze on energy prices in a support package worth more than £150 billion.
Average energy bills will be frozen by the government in 2500 pounds for a typical family From October for the next two years, in an intervention Truss launched in her first week as prime minister to protect rich and poor alike from rising costs.
However, the government has faced sharp criticism for failing to provide targeted support to the poorest families, as the emergency cost of living affects those on lower incomes more than the wealthiest individuals.
According to PEF, a middle-income family is expected to spend a third of their disposable income on energy bills, nearly double the 17% they paid in 2020. But families in the top 10% will only pay a fifth of their disposable income toward energy costs.
Highlighting the risks to the most vulnerable groups in society, she said the share of income spent by the poorest tenth of households on their energy bills will double from 23% in 2020 to 47% this year.
The estimates, which were produced using government figures for household consumption, include the effects of the universal energy price guarantee and the £400 energy discount for all households.
In addition to the bill freeze and energy deduction, the government will pay between 650 and 8 million families on the tested benefits, with additional help for retirees and the disabled.
Inflation has risen to its highest rate since the early 1980s, as households are under pressure from a weekly store price hike as well as rising gas and electricity costs. Despite the government’s freeze on bills, energy costs will still be more than double the level a year ago.
James Midway, Director of the Forum for Progressive Economics, said: “These figures demonstrate the urgent need for additional family income support over the next six months. With domestic energy bills still on average 64% above their 2020 levels, despite government support, and food prices continuing to rise rapidly, households in Britain face a bleak few months.
“The government should urgently submit plans to reform the energy tariff system, ensuring that basic free energy needs are provided to homes and bringing energy suppliers into public ownership as needed.”