Energy ‘increasingly becoming a luxury only the wealthy can afford’

New analysis shows energy bills will fast outstrip people’s incomes to the point where paying them becomes fantasy.

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The Joseph Rowntree Foundation (JRF) warns that energy may increasingly become a luxury only the wealthy can afford, as it releases fresh research indicating that low-income families would face unimaginable expenditures that consume a larger portion of their family budgets than those of the wealthy.

This morning, the energy regulator Ofgem revealed a new price ceiling that may result in average monthly costs of £3,549 beginning in October.

Cornwall Insight forecasts more high price increases for January and April, citing Ofgem’s statement that “the market for gas in winter means that prices could get significantly worse through 2023.”

In 2023/24, the lowest fifth of households, who are projected to earn an average of £11,600 after taxes and housing costs, would spend over half (46%) of their income on energy bills.

However, middle-income households, with average salaries of £31,400, will spend less than half of this proportion, a still historically high 19%, on the same costs.

Many homes will be placed in untenable circumstances. After housing expenditures, the energy bill for a low-income adult living alone is projected to exceed the totality (up to 120%) of their income.

This is a very difficult scenario, since they must reduce energy use just to pay their bill and have little money left over for food or other necessities.

Therefore, in order to pay their energy bills alone, they would need to spend their whole salary and acquire more funds. As a result, they would almost likely become destitute.

Couples without children and single parents with low salaries spend nearly two-thirds of their wages to keep the lights on and prepare daily meals.

For pensioners in the same financial situation, energy will make up around 40% of their disposable income.

JRF is calling for an immediate implementation of a comprehensive emergency package that addresses the issue as creatively and swiftly as furlough did in the early stages of the pandemic.

Peter Matejic, Chief Analyst at the Joseph Rowntree Foundation, said: “The Government devised its support package based on a previous energy price forecast made obsolete by today’s extraordinary announcement.

“With the price cap very likely to increase significantly and forecast to remain high well throughout next year, our analysis shows it is a sheer fantasy to think struggling families can pay these stratospheric energy bills without further Government intervention on a significant scale.

“In all my years as an analyst, I haven’t double-checked a piece of analysis as much as this one because it is so staggering, it feels incorrect.

“It is impossible to think a care worker or a shop assistant will have to scramble to find hundreds more pounds to pay for their heating or that the entirety of someone’s income for a whole year will be less than their energy bill.

“But that’s what these figures suggest will be the case unless significant further steps are taken quickly.

“Ministers have a choice about who shoulders most of the burden – families, businesses or the public finances.

“Whoever occupies number 10 next will be remembered for who they protect – they must make sure energy doesn’t become a luxury only the wealthy can afford.”

“The Government must immediately respond with a comprehensive emergency package to cover the period of these extreme price rises, just as they did so creatively and quickly with furlough during the early stages of the pandemic”.

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