Poorest risk of spending semi-disposable income on energy bills, says UK report | UK cost of living crisis

Britain’s poorest households risk spending nearly half of their disposable income on gas and electricity bills this winter, according to a report, despite the government’s energy price guarantee.

The Progressive Economy Forum (PEF) said the poorest tenth of households could face bills of 47% of their disposable income this winter, even taking into account the support of Liz Truss’ energy price guarantee.

The analysis comes as the Chancellor, Kwasi Kwarteng, prepares to use his mini-budget on Friday to implement sweeping tax cuts targeting middle and upper income earners, on top of the energy price freeze in a support package to worth over £150 billion.

Average energy bills will be frozen by the government at £2,500 for an average family from October for the next two years, in an intervention Truss launched in her first week as Prime Minister to protect both rich and poor from skyrocketing costs.

However, the government has been sharply criticized for failing to provide targeted support to the poorest households, as the cost of living emergencies hit those on low incomes harder than those who are wealthier.

According to PEF, a middle-income household is expected to spend a third of their disposable income on utility bills, nearly double the 17% they paid in 2020. But households in the top 10% pay only a fifth of their disposable income towards energy costs.

It highlighted the risks to the most vulnerable in society and said the share of income spent on their energy bills by the poorest tenth of households would more than double from 23% in 2020 to 47% this year.

The estimates, made from government figures for household consumption, include the effects of the general energy price guarantee and £400 energy discount for all households.

In addition to the bill freeze and energy cut, the government will pay £650 to 8 million households in means-tested benefits, with additional help for retirees and people with disabilities.

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Inflation has risen to its highest level since the early 1980s as households come under pressure from rising weekly store prices alongside skyrocketing gas and electricity costs. Despite the bill freeze by the government, energy costs will still be more than double what they were a year ago.

James Meadway, director of the Progressive Economy Forum, said: “These figures show the urgent need for additional support for household income over the next six months. With domestic energy bills still rising by an average of 64% from 2020 levels despite government support, and food prices still rising rapidly, households in Britain are facing a bleak few months.

“The government urgently needs to plan for an overhaul of the energy tariff system, with households requiring free basic energy and bringing energy suppliers into public ownership where necessary.”

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