Millions of UK households are expected to be dragged into fuel poverty for the first time despite the support announced by Rishi Sunak to soften the blow from soaring energy bills.
Several charities warned that the chancellor his plan was badly targeted and offered too little support for those most in need. The scale of the shock to low-income households would drive hunger, rent arrears, and ill health, and pile extra demand on to already stretched food banks and homeless shelters, they said.
The Resolution Foundation thinktank said cases of fuel stress – where energy bills in a household exceed 10% of disposable income – would double to 5 million in April despite the steps announced by Sunak on Thursday.
The Treasury’s intervention was designed to ease the pressure of a £700 increase in the regulated energy price cap to nearly £2,000 a year.
Without the chancellor’s plan – which offers most consumers £350 of relief on their bills – fuel stress would have trebled to more than 6 million, the thintank said. However, it criticised Sunak’s decision to favour a moderate amount of help for a large number of people, rather than deeper support for those most in need.
“The government’s package of measures might cushion the blow for some but it’s not enough to protect people who already need a food bank,” said Garry Lemon, the policy director at the Trussell Trust food bank network. He called for the planned 3.1% rise in benefits from April to be doubled to 7%.
Almost all families in the poorest tenth of households in Britain face spending more than 10% of their disposable income on heating and electricity bills, according to the IPPR thinktankMeanwhile, it estimates 44% of those in Britain with the highest household incomes – the top 10% – would in effect get a tax cut from Sunak’s measures.
Dame Clare Moriarty, the chief executive of Citizens Advice, said: “Even before these price hikes kick in, we’re seeing record numbers of people needing crisis support like food vouchers … If the government is serious about helping families facing the desperate choice between heating and eating it should use the benefits system.”
Pressure on incomes will build over the coming months after the Bank of England increased interest rates from 0.25% to 0.5%, in a development designed to tackle soaring inflationary pressures but that will probably drive up household costs in the short-term.
The Bank’s economists are forecasting inflation will peak at 7.25% in April, up from 5.4% at present. Along with the rising cost of a weekly shop, British households will also face higher borrowing costs on mortgages and credit cards. The government also plans an increase in national insurance contributions in April – the same month as the energy price rise.
Tony Syme, a macroeconomics expert at the University of Salford Business School, said: “The increase in interest rates will have minimal effect on inflation and will only exacerbate the cost of living crisis. Higher housing costs will be passed on to homeowners through increased mortgage rates and on to renters as landlords pass on their increased costs of borrowing.”
“These energy crisis measures are woefully inadequate and will leave those on the lowest incomes and in the least efficient homes in deep peril,” said Adam Scorer, the chief executive of charity National Energy Action. “We needed deep, targeted support for the most vulnerable. We have shallow, broad measures for all. That simply does not work.”
Although the chancellor announced a £150m hardship grant for English councils to help struggling families, critics said the dismantling of the local welfare system over the past decade meant many authorities lacked the resources and expertise to deliver meaningful crisis support.
“Budget cuts mean 32 English councils have closed their crisis schemes leaving 13 million people in England without this support. These local authorities no longer have the infrastructure or processes in place to direct additional government funding to those most in need of help,” said Claire Donovan, of End Furniture Poverty.