Britain’s poorest households risk spending almost half their disposable income on gas and electricity bills this winter despite the Government’s energy price guarantee, according to a report.
The Progressive Economy Forum (PEF) said the poorest tenth of families could face bills of 47% of their disposable income this winter, even after taking into account the support from Liz Truss’ Energy Price Guarantee.
The analysis comes as the chancellor, Kwasi Kwarteng, prepares to use his mini-budget on Friday to introduce sweeping tax cuts aimed at middle and higher income workers on top of the energy price freeze in a support package worth more than £150 billion.
Average energy bills will be frozen by the government at £2,500 for a typical family from October for the next two years in an intervention launched by Truss in his first week as Prime Minister to protect rich and poor alike from skyrocketing costs.
However, the government has faced sharp criticism for failing to provide targeted support to the poorest households, as the cost of living in emergencies hits those on low incomes harder than wealthier people.
According to PEF, an average-income household is expected to spend a third of their disposable income on energy bills, almost double the 17% they paid in 2020. But households in the top 10% will only pay a fifth of their disposable income on energy costs.
It highlights the risks to the most vulnerable in society and says the share of income spent by the poorest tenth of families on their energy bill will more than double from 23% in 2020 to 47% this year.
The estimates, produced using public figures for household consumption, include the effects of the general energy price guarantee and the £400 energy rebate for all households.
As well as the bill freeze and energy rebate, the government will pay £650 to 8 million households on means-tested benefits, with extra help for pensioners and disabled people.
Inflation has risen to its highest level since the early 1980s as households come under pressure from the rising price of a weekly shop in addition to skyrocketing gas and electricity costs. Despite the government’s freeze on bills, energy costs will still be more than double the level of a year ago.
James Meadway, the director of the Progressive Economy Forum, said: “These figures show the urgent need for further support for household incomes over the next six months. With domestic energy bills still set to rise by an average of 64% from their 2020 levels, despite government support and food prices still rising rapidly, UK households face a bleak few months.
“The government must urgently bring forward plans for an overhaul of the energy tariff system that guarantees free basic energy needs for households and brings energy suppliers into public ownership as needed.”