This spring’s expected near-50% hike in the retail energy price cap will put £700 per year more on default tariffs, hitting Britain’s poorest hardest, a leading charity advising on fuel poverty warns today.
Already, says Citizens Advice, its frontline services have seen a 40% rise in requests from consumers with fuel debts. It calls today for government to provide a one-off grant this April to support families on the lowest incomes.
Further rises to the energy price cap will put energy bills as a proportion of benefit levels at a ‘generational high’, tipping millions more into hardship, according to Citizens Advice.
In November Ofgem began a consultation on new ways of calculating the price cap. Continuing talks between energy leaders and D-BEIS and Treasury officials since before Christmas have yet come up with a solution to gas surging in price on world markets. Nervous Conservative backbenchers fear a cost-of-living crisis will inflict electoral damage on the government at nationwide election on 5 May.
Citizens Advice analysed energy tariff data against historic levels of benefit going back to 2002. It found April’s anticipated rise in the price cap, estimated using Ofgem’s current method, will leave a single adult spending 33% of the basic rate of Universal Credit on energy.
Nine months from now, this could rise to 37% of the standard UC allowance. The figures represent a historic high compared to 2002 levels which saw 14% of basic rate benefits spent on energy bills.
Up to 2.1 million single adults without children currently claim this basic rate of Universal Credit. The charity’s modelling excludes other benefit payments, including for housing costs.
Heat or Eat? – “Worst it’s ever been”
Since October Citizens Advice says its frontline staff have helped one person every 40 seconds with a fuel debt problem, 40% up on to the same period in 2020. Its webpage on grants and benefits to help people pay their energy bills is now the most viewed it has ever been.
In December CA’s consumer service supported double the number of people who’d run out of money to top up their prepayment meter, compared to the same time in 2020.
Given a 50% hike in the price cap three months from now, around 11 million households on default tariffs will see their bills increase straight away, the charity calculates.
Its figures are based on the annual rate of core income-based unemployment benefits, excluding housing and childcare benefits. Analysts use standard level Universal Credit for a single adult over 25. Energy costs examined are based on a single person living alone.
Citizens Advice estimates an additional 600,000 customers now on cheaper fixed rate tariffs will see their bills rise by a further £150 when their fixes end in the summer. The price cap will go up again in October by an estimated £200.
The charity is urging the government to bring forward a package of support to help people with their bills, including a one-off Energy Support Grant to be paid through the benefits system this April and an expanded Warm Home Discount scheme.
Nicola Duffy, energy team leader at Citizens Advice in Newcastle, said: “In over twenty years of advising, this is the worst it’s ever been. We’re seeing people ration their fuel, or have their emergency prepayment meter run out when they’re at least a week away from their next benefit payment.
“We supported one family whose electric was off. The food they had in the fridge and freezer was starting to spoil.”
Dame Clare Moriarty, the charity’s CEO said: “These figures confirm what we’re already seeing through our frontline services. Energy costs are eating into budgets and it’s families on the lowest incomes who’re feeling the biggest squeeze.
“With further hikes set to push bills to a generational high, disaster is on the horizon if the government doesn’t act. The single best way of helping low-income families weather April’s price cap rise is a one-off payment through the benefits system.
She called too for an expansion in the Warm Home Discount.