Charities warn of "perfect storm" of higher energy bills and income cuts

Charities have warned of a “perfect storm” of higher energy bills and reduced incomes this autumn, with 15 million households set to be hit with a rise of at least £139 from October.

An increase to Ofgem's energy price cap "could not be coming at a worse time", charities have warned.

Regulator Ofgem said the price cap for default domestic energy deals would be raised due to a rise in wholesale prices.

It means an increase of £139 for people on default gas and electricity tariffs – and a £153 rise for prepayment meter customers, who are generally the poorest in society.

At the same time the government plans to reduce Universal Credit by scrapping the £20 uplift to the social security payment made as a result of the Covid pandemic, reducing the incomes of the lowest paid workers and those dependent on benefits.

On his visit to Scotland, the Prime Minister again supported the Universal Credit cut, despite fears it will further impoverish millions of people, as he ducked a question on the Ofgem’s decision to raise the price cap.

Around 40 per cent of those in receipt of Universal Credit are in work, and according to Citizens Advice Scotland (CAS), one in seven people are struggling on their current income. The organisation has warned that raising people’s energy bills while cutting income will increase financial hardship for thousands of Scots.

When asked on Thursday how people are expected to “bounce back if you take money out of their pockets by removing the £20” and for his view on Ofgem’s decision, the Prime Minister avoided the latter question entirely and said: “On Universal Credit, our priority I've said is jobs, jobs, jobs, jobs. And that means getting people into work is the priority.

"We want to see work rewarded well. And so we we've lifted the living wage by record amounts and will continue to do so. We continue to do furlough and this is continuing until the end of September.

"But what we want to do is get people into into work. So we've got the Kickstart programme for the younger people, the Restart programme for those who've been out of work for longer, the drop entry training schemes, a massive array of things to get people into work.

"And actually what I see at the moment is wages going up and a huge demand for labour. That's what we need to focus on. Getting people into work is the priority and if you talk to people in the hospitality sector or many other parts of the UK economy they need high wage high skilled workers as fast as they can.

"We can encourage them to get into the into the labour marketplace.”

Around 470,000 Scots currently receive Universal Credit – a number which has doubled since the start of 2020. Meanwhile an estimated 24 per cent, or around 613,000 Scottish households, are believed to be in fuel poverty –paying more than 10 per cent of their net income on energy, once housing costs are deducted.

The energy price cap protects consumers who have not switched energy supplier by ensuring they pay a fair price for their electricity and gas. Ofgem adjusts the level of the cap twice a year to reflect the costs of supplying electricity and gas for suppliers.  

Earlier this year the cap increased by £96 to £1,138 for 11 million default tariff customers, and by £87 to £1,156 for 4 million pre-payment meter customers. The new price cap will come into effect on October 1.

CAS Fair Markets spokesperson Kate Morrison said: “News of this increase points towards a perfect storm for consumers this autumn, with higher bills coinciding with an end to the furlough scheme and proposals to cut Universal Credit by £20 per week,

“Lots of people are struggling just now. One in seven people are struggling on their present income according to polling for CAS. That’s before higher bills and lower incomes this autumn.

“That this increase seems to be driven by the increasing cost of fossil fuels should also focus the mind ahead of COP 26 in Glasgow this year. It’s another example of why we need to switch to low carbon heating as alongside the right actions from government it will be cheaper for us all in the long run.

“If people are struggling with energy bills they can also turn to the Citizens Advice network for support. We can help you with specific energy advice as well as ensure you are getting all the money you are entitled to.”

Glasgow East SNP MP, David Linden, who has over 10,000 people in his constituency on UC, said: “At a time when families are still suffering from the triple whammy of Brexit, the pandemic and a decade of Tory austerity cuts, the last thing the UK government should be doing is slashing people’s benefits – particularly when we know energy prices are going to rise, leaving millions poorer and worse off.

“I am urging Boris Johnson to take into account the rise in energy prices – which he himself promised would not happen – and make the Universal Credit uplift permanent and extend it to legacy benefits, instead of ending it in October."Scottish Labour social security spokesperson Pam Duncan-Glancy also criticised the move. She said: “Not only are the UK Government’s plans to cut the uplift shameful, but the Prime Minister's comments show just how little he understands reality – this is not a choice between work and social security.

“To go ahead with scrapping the Universal Credit uplift while hundreds of thousands of people live in hardship – made worse by the pandemic – is both dangerous and shameful.

“Thousands of livelihoods are still on the line and our economy is still subject to restrictions and reeling from the impact of the pandemic.

“At this crucial moment, the government should be doing all it can to support people to stay afloat – not pulling the rug out from under them.”

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