There’s a Possibility of Claimants Facing 4X Energy Bill Hike

21 September, 2021 by Denzil Otieno 5 mins read Category:  Money Personal Finance

According to the regulator Ofgem, British consumers will see a considerable increase in their energy bill payments due to the rising problem in fossil fuel access. According to a recent study, Universal Claimants are four times more likely to increase energy bills next year. Furthermore, welfare claimants’ payouts are set to be lowered next month.

According to the Resolution Foundation, families receiving Universal Credit payments are four times more likely than the rest of the UK population to be affected by the looming energy price hike. 

This is because welfare applicants are more likely to be on prepayment meters, resulting in higher bills. MPs and poverty advocates are growing increasingly concerned about the government’s intention to terminate the £20 benefit payment increase, which is set to be pulled back by the beginning of next month.

Ofgem Estimation of 12 Percent Energy Bill Increase 

From October 1, 2021, households may expect a 12% hike in their current energy cost, according to Ofgem.

For an average gas and electricity user in the UK, this equates to a £139 annual increase to about £1277.

Customers with prepayment meters will face an even larger price of £153 per year, a 13% increase over their current payments. 

Customers who pay in advance are more likely to be on a variable rather than fixed-rate tariffs, which means they will be impacted more when the price hikes take effect.

Resolution Foundation Appeals to the Government

The Resolution Foundation is calling on the government to protect low-and-middle-income households in reaction to these disturbing numbers. 

The think tank urges the government to reconsider its proposed cut to Universal Credit, which it believes will worsen its poverty levels.

The “double whammy” of the benefit cut and bill hike, according to Jonny Marshall, Senior Economist at the Resolution Foundation, will affect most people.

“This autumn, low-income families will face a cost-living crunch on various fonts with energy bills rising alongside high increased prices, while Universal Credit is set to be reduced by £20 weekly,” Mr. Marshall added.

15 Million Houses Expected to Watch for More Prices 

When the energy price cap is increased next week, over 15 million families will see high bills.

Low-income households on Universal Credit will have increased bills as they are four times more likely to be on prepayment meters than the rest of the population.

Mr. Marshall also requested that the Prime Minister cease the cut to Universal Credit and that the Government make more benefit payments accessible to low-income families.

He added that the government should make sure the cost and volatility of increasing energy prices don’t rest only on households shoulders.

For example, the weekly £20 uplift to Universal Credit should be maintained, and support initiatives such as the Warm Homes Discount should be made more widely accessible to families.

In the long run, we can do more to safeguard low- and middle-income families from fluctuating energy price shocks by reducing the country’s reliance on imported fossil fuels through a comprehensive home efficiency retrofit program and increasing renewable energy generation and storage.

Resolution Foundation’s Chief Executive Speaks Out

The Resolution Foundation’s Chief Executive Torsten Bell explained why these reforms could not have occurred at the worst moment for the country on Twitter.

“How do energy prices increase and Universal Credit cuts interact?” Mr. Bell asked. 

Not only will people on Universal Credit have their salaries decreased by 5% overnight in October,  but the energy price cap will also rise similar hikes in wholesale costs (the cap will rise by £100s in the spring) 

As a result, autumn is shaping up to look like a  cost of living crunch.

Millions of families will see their energy costs rise by 13% at the same time that their annual income drops by £1000. Also, keep in mind that general inflation is expected to hit 4% this winter.”

Citizens Advice can help anyone worried about how the Universal Credit cut and increased energy bills may affect their finances.

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