Some 4.4 million households on Universal Credit are poised to see their energy bills rise significantly in October – the same month they will typically lose over 5% of disposable income as the £20-a-week uplift to the benefits payment ends – the Foundation said.
The energy price cap is set to rise by £139 a year (12%) to £1,277 for a typical gas and electricity customer a year from October 1.
But a larger increase of £153 (13%) a year will affect pre-payment meter customers, the Foundation said.
The Government must ensure that the cost and volatility of rising energy bills doesn't fall entirely on households, for example by making support schemes like the Warm Homes Discount more widely available to households, and maintaining the £20 a week uplift to Universal Credit
Jonny Marshall, Resolution Foundation
Families on Universal Credit are four times as likely as the wider population to be on pre-payment meters – and pre-payment meter customers are overwhelmingly on variable rather than fixed rate tariffs and so will be more swiftly affected by price rises – it added.
Dame Clare Moriarty, chief executive of Citizens Advice, said: “This is a hugely unsettling time for millions of energy customers. It’s particularly worrying for many on the lowest incomes who’ll be facing the double whammy of rising fuel bills and a benefits cut.
“With choppy waters ahead, the single best thing the Government can do is keep its lifeline of £20-a-week to Universal Credit.”
The uplift in Universal Credit payments is scheduled to end on October 6.
Downing Street has insisted the cut will go ahead.
A Number 10 spokesman said the “uplift to Universal Credit was always temporary”.
It had been designed to “help claimants through the economic shock and the toughest period of the pandemic”.
Jonny Marshall, senior economist at the Resolution Foundation, said: “Low income families are facing a cost of living crunch on several fronts this autumn with energy bills rising alongside wider price increases, while Universal Credit is also due to be cut by £20 a week.
“Around 15 million households are set to face higher prices next week when the energy price cap is raised.
“This will be particularly acute for low income families on Universal Credit, who are four times as likely as the rest of the population to be on pre-payment meters, and therefore face even bigger increases to their bills.
“The Government must ensure that the cost and volatility of rising energy bills doesn’t fall entirely on households, for example by making support schemes like the Warm Homes Discount more widely available to households, and maintaining the £20 a week uplift to Universal Credit.
“In the longer term we can do more to protect low-and-middle-income households from volatile energy price shocks by ensuring the country is less reliant on imported fossil fuels with an extensive home efficiency retrofit scheme, while ramping up renewable energy generation and storage.”
There are also concerns about how cancer patients will cope with the added pressure on their finances.
It is utterly unconscionable that Universal Credit is being cut
Steven McIntosh, Macmillan Cancer Support
Steven McIntosh, executive director of advocacy and communications at Macmillan Cancer Support said: “A cancer diagnosis can put a huge strain on people’s finances – whether because they’re simply too ill to work, or encounter much higher costs for bills or travel while having cancer treatment.
“Our Support Line regularly receives calls from people who just don’t know how they will choose between paying for the additional heating or electricity they need, or putting food on the table.
“For them, and the tens of thousands of others like them across the UK, the news of energy price hikes will be devastating.
“It is utterly unconscionable that Universal Credit is being cut. We implore the Prime Minister to cancel the cut, and help to protect tens of thousands of people living with cancer from having to choose between eating or heating this winter.”
Conservative former Cabinet minister Damian Green said “now is not the time” to cut the benefit and told the BBC: “We are clearly coming into a huge problem for the cost of living for people, so those who are receiving Universal Credit – many of them are in work and so therefore are working as hard as they can to keep their families out of poverty – they will be the ones who are going to be most hit by the upcoming problems with inflation and energy prices and so on.”
Professor David Gordon, director of the University of Bristol’s Poverty Institute said the reduction in Universal Credit payments combined with rapid rises in living costs “are likely to result in the largest jump in child and adult poverty since World War Two”.
He warned: “If this coming winter is not unusually warm then fuel poverty and excess winter deaths are likely to increase significantly.”