Low-income households hardest hit by soaring energy bills, think tank says

Low-income households will have to reduce their purchasing power three times as much as high-income households to pay their energy bills this winter, according to a think tank.

The Resolution Foundation’s predictions were based on forecasts by consultants Cornwall Insight that the energy price cap could hit £4,266 from January.

The poorest households, in the bottom fifth of the income distribution, will have to cut almost £1 for every £4 (24%) of their ‘non-essential’ spending in order to be able to afford heating, rent and self-sufficiency. provide food, transport and communications from January to March 2023, the Foundation estimated.

But the tenth of the wealthiest households will cut around £1 in every £12 (8%) of their non-essential spending to meet higher heating bills, reflecting the fact that spending on gas and electricity accounts for a much smaller proportion of their total expenditure. , the Foundation said.

Also key, the Foundation added, is that rising energy costs will coincide with winter, when household demand will increase dramatically.

Nearly half of annual household gas costs come from usage between January and March, he said.

The think tank said the type of housing people live in will also play a big role in driving up their costs, with the financial consequences of living in energy-efficient homes hitting families at home the hardest. low income.

The Foundation focuses on improving the standard of living of low to middle income people.

Preventing middle-income families from falling behind on unaffordable energy bills should also be an important part of any new strategy.

Karl Handscomb, Resolution Foundation

A cost-of-living relief package, which includes a £400 reduction on energy bills for households in general, as well as targeted support for particularly vulnerable people, will be rolled out over the coming month.

Karl Handscomb, senior economist at the Resolution Foundation, said: “With the support package announced in May, it is clear that hundreds of pounds per household are short of what will be needed, and households are already facing decisions difficult budgets, the government will have to act quickly to put in place this winter the necessary assistance for the energy bill.

“Helping the lowest income households, who will be hardest hit by soaring energy bills – and forced to cut spending nearly three times as much as the wealthiest households – remains the top priority.

“But preventing middle-income families from falling behind on unaffordable energy bills should also be an important part of any new strategy.

“Longer-term, the fact that families living in energy-inefficient housing will face some of the most severe increases also underscores the need to source cheaper energy, deploying low-cost renewables. , and strive to properly insulate UK homes. ”

A government spokesperson said: ‘We know the pressures people are facing with rising costs, which is why we have continuously taken action to help households by phasing in £37billion of aid .

“Eight million of the most vulnerable households will get an extra £1,200 in support, delivered in installments throughout the year, and each will get a £400 reduction on their energy bills during the winter.”

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