Energy bills: Poorer UK households need to cut £1 in every £4 spent to afford to pay
Low-income households will have to cut their spending by 24% in order to afford their energy bills, according to a think tank.
Poorer households will have to cut back almost £1 in £4 of “non-essential” spending in order to be able to put on the heating, pay the rent, and afford food, transport and communication in the first three months of 2023, the Resolution Foundation said.
With record high energy prices set to climb even higher in winter, the think tank warned that a typical low-income household paying by Direct Debit would need an extra £418 to pay their energy bills over the first three months of next year than was expected back in May 2022.
Energy consultants have warned that UK households face a staggering £4,200 in energy bills this winter as the price cap is reviewed by regulator Ofgem. The latest forecast is even more grim, predicting bills will hit £5,300.
Read more: Energy bills: Boris Johnson's 'zombie government' fails to offer new support
Come January, families in energy-inefficient homes will be facing monthly gas bills £231 higher than those who live in equivalent homes that already meet the government’s efficiency target (EPC C). Over the 2022-23 winter period, this penalty adds up to £849, an average of £141 per month.
“With the support package announced in May now clearly hundreds of pounds per household short of what will be needed, and households already facing difficult budgeting decisions, the government will need to act swiftly to put in place the necessary energy bill support this winter,” said Karl Handscomb, senior economist at the Resolution Foundation.
“Helping the lowest-income households, who will be hit hardest by soaring energy bills – and forced to cut back their expenditure by almost three times as much as the richest households – remains the core priority.
“But preventing families on middle incomes from falling behind on unaffordable energy bills should also be an important part of any new strategy,” he added.
Read more: Energy bills: How to cope with soaring prices
In contrast, the richest tenth of households will only have to cut back 1 in £12 (8%) of their non-essential spending in order to accommodate the higher heating bills.
The think tank warned that high gas costs will “inevitably” lead people to cut back, with a “real risk” of families sitting in the cold this winter.
The Foundation estimates that the daily cost of turning the gas heating on will be £7.34 this winter, even for families in energy efficient (EPC C) homes. For those in badly insulated homes this figure rises by more than half (58%) to £11.60 per day. In the last pre-COVID winter, there were 28,300 excess winter deaths in England and Wales.
Almost half (49%) of the poorest fifth of households live in homes with uninsulated walls.
The Resolution Foundation said that with households already facing difficult budgeting decisions, the government will need to act quickly if it is to put in place the support that will be needed this winter, as well as accelerating changes in how we produce and consume energy so households are less exposed to price shocks.
Read more: Energy bills: 6 million households already in debt before October rise
“Longer-term, the fact that families in energy-inefficient housing will be facing some of the most severe rises also highlights the need to source cheaper energy, by rolling out low cost renewables, and for a drive to properly insulate the UK’s homes,” Handscomb said.