Energy support benefits the better off and doesn’t go far enough to address the cost-of-living crisis facing low-income families or the UK’s longstanding poverty crisis.
The Government recently announced the Energy Price Guarantee, to be introduced from October 1st. Under the guarantee, a typical household will pay up to an average of £2,500 a year for energy for the next two years. Support was also announced that will cap prices for businesses, charities, and the public sector organisations for 6-months.
We are fast approaching what is going to be the most difficult winter in decades. Whilst the Energy Price Guarantee is welcome, it is poorly targeted and will not prevent many low-income households from reaching crisis point.
- The support package does not go far enough, low-income households will still be worse off than they arecurrently. The poorest households will be £400 worse off and face energy bills of nearly £2,000.
- It is not targeted to those most in need and gives support to households regardless of their income. This means it will benefit well-off households the most as they tend to be the highest users of energy. IFS analysis reveals among households in the lowest-income tenth of the population the average gain is expected to be about £1,600 over the coming year compared to nearly £2,000 for those in the highest-income tenth of the population. Over half of the £60 billion giveaway to households will go to the top half of the income distribution.
- It is estimated the policy could cost £130 billion over the next 18 months, more than the two Covid furlough schemes and it could eclipse the bailouts for banks during the financial crisis. The package is likely to put enormous pressure on public finances. Hard-working families will be paying for this cost for decades, yet the support does little to help those who will be struggling the most. Low incomes households deserve a much more cost-efficient approach that is better designed.
Long-term solutions are needed
It is also deeply disappointing that the Government has not announced any further support to help those on the lowest incomes, as energy prices are not the only costs that are increasing. A new up-to-date Cost-of-Living support package must be introduced, as the first part of a strategic response to tackling poverty in the long term.
As part of a comprehensive strategy to deal with poverty, GMPA is calling for:
- Widespread adoption of the Real Living Wage by employers.
- Increases in benefits and pensions in line with inflation.
- Scrapping of the Bedroom Tax and two-child limit on benefits.
- A reversal of the £20 per week cut to Universal Credit.
- A national benefit uptake campaign that ensures everyone can access the financial support they are entitled to.
You can find out more about GMPA’s response to the cost-of-living crisis here.