The number of households suffering from “fuel stress” – those spending at least 10% of their family budgets on energy bills – is set to treble to 6.3m overnight when the new energy price cap comes in on 1 April, according to a leading research group.
Fuel stress will no longer be confined to the poorest households, according to a study by the Resolution Foundation. Low- and middle-income families will also find it hard to cope as they spend a far greater share of their family budget on these essentials than higher earners.
The forecast will add to calls for the government to take action to avert a cost-of-living catastrophe after global energy market prices surged to record levels.
The research shows 9% of English households are currently experiencing fuel stress, an indicator of finding energy bills unaffordable and also the definition of fuel poverty in Wales, Scotland and Northern Ireland.
That figure is expected to leap to 27% when the energy price cap rises to about £2,000 a year in April, an increase of more than 50%. The energy regulator, Ofgem, will announce the new price cap level on 7 February.
Levels of fuel stress are expected to be highest in the north-east and the West Midlands (33% and 32% respectively), among pensioner households (38%), among those living in local authority housing (35%) and those in poorly insulated homes (69% of families in homes with an energy performance certificate F-rating).
Jonny Marshall, senior economist at the Resolution Foundation, said: “Fuel stress levels are particularly high among pensioner households and those in poorly insulated homes – a stark reminder of the need to modernise Britain’s leaky housing stock and curb national dependency on gas for power and heating.”
The foundation called on the government to intervene and said the most effective way to support lower-income families was through the benefits system, with a faster-than-planned uprating of benefits in April, when support is due to rise by 3.1%.
An alternative would be an additional payment based on the warm homes discount. The thinktank recommended raising the £140 payment by at least £300; widening eligibility to all families in receipt of pension credit or working age benefits (8.5m families in total) and making payments automatic; making them timelier – the extra support should be delivered via an additional bill discount this spring, following the normal winter round; and making them taxpayer funded, rather than through further increases in everyone else’s energy bills. The foundation has calculated that the measure would cost the taxpayer £2.5bn.
A vastly improved warm homes discount would cut the number of households living in fuel stress by about five percentage points, equivalent to more than a million families.
The thinktank called for government action to cut everyone else’s energy bills too, by temporarily transferring social and environmental levies from bills to general taxation. This would cut average bills by around £245 and would reduce the number of families in fuel stress by more than seven percentage points – or 1.7m families – at a cost of £4.8bn to the taxpayer.
In total, energy bills would be reduced by up to £545 a year, at a cost of £7.3bn, and 2.7m fewer families would be living in fuel stress.
“While not cheap at £7.3bn, this plan is affordable, and by cutting bills by up to £545 would help prevent the upcoming rise in energy bills turning into a cost of living catastrophe for millions of families,” Marshall said.