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Energy price hike: 5 million English households to feel pinch from rising bills

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Fuel stress
The Resolution Foundation estimates that a £500 rise in the price cap to £2,500 on 1 October would see 7.5 million families in England fall into fuel stress. Photo: Jon Super/Xinhua via Getty Images

The number of English households in "fuel stress" will double from 2.5 million to 5 million as a result of the price cap increase from Friday, a report suggests.

According to the Resolution Foundation another 2.5 million households are at risk of fuel stress in October if the price cap rises again to £2,500 ($3,284).

The Foundation estimates that a £500 rise in the price cap to £2,500 on 1 October would see 32%, or 7.5 million, of all families in England fall into fuel stress.

It argues that more support with energy bills is needed, and that the benefit system is a far more effective route to helping low-income households.

The rise in the energy price cap is set to add an extra £58 a month to the average energy bill from 1 April.

Nearly a quarter (24%) of households in the North East are in fuel stress, the highest in the country, a figure that could rise to 41% in October.

The think tank's, Stressed Out report shows that low-income households will feel the tightest pinch, with the poorest fifth of households set to spend 10% of their budgets on energy bills, versus the richest fifth (4%).

Read more: Sunak bailouts lifted UK poor incomes during first year of COVID, study says

Those living in poorly insulated homes, with an energy efficiency rating of E, will feel rising prices more than others, as bills are set to soar £320 a year than those in similarly-sized C-rated homes. This 'efficiency gap' could hit £380 in October.

The government’s Energy Rebate Scheme – a £150 Council Tax rebate and a £200 discount for all billpayers, will help reduce the impact of the price cap rise on low-income households, it said.

Resolution Foundation added the support will limit the rise in low-income households’ spending on energy bills from 7% to 10%, rather than 7% to 12%.

However, it warns that support doesn’t go far enough in protecting low-income households from rising energy bills, calling the scheme "deeply flawed".

"While this policy is broadly progressive, it is not the most effective way of targeting support at low-income households," the think tank said. "11% of the poorest fifth of households are ineligible for the rebate, because they live in Band E-H properties, while 59% of the richest fifth are eligible."

Poor households in London are most likely to miss out on help, with one-in-five of the poorest fifth of households living in Band E-H homes ineligible for automatic support.

Read more: Cost of living crisis: UK shop prices rise at highest rate since 2011

The Foundation said while short-term measures are needed to support families through the cost of living crisis, a wider energy strategy is needed to protect households exposed to future fossil-fuel price shocks.

It recommended:

  • Scaling up and accelerating plans to better insulate housing stock

  • Reforming Britain's energy market

  • Reducing the UK's dependence on natural gas via an accelerated move to heat pumps

  • Faster rollout of renewable and nuclear electricity

Jonathan Marshall, senior economist at the Resolution Foundation, said: "There are no easy ways to protect people from rising bills in the current climate.

But with many of the poorest households missing out on the Council Tax rebate, this scheme should be used to supplement, rather than replace, support via the benefit system, which is better equipped to target lower-income families.

"Another increase in energy bills this autumn hastens the need for more immediate support, as well as a clear, long-term strategy for improving home insulation, ramping up renewable and nuclear electricity generation, and reforming energy markets so that families’ energy bills are less dependent on global gas prices."

Watch: Why are gas prices rising?

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