Four in ten Universal Credit households face 13% energy bills increase

24th September 2021

The Government must do more to protect low-and-middle-income households from rising energy bills, with families on Universal Credit (UC) four times as likely as the wider population to be on pre-payment meters and therefore face higher energy bill hikes in October, new Resolution Foundation research had found.

The Foundation notes that 4.4 million households on UC are set to see their energy bills rise significantly in October, the same month that will see them typically lose over 5 per cent of their disposable income as the £20 a week uplift to UC comes to an end, and as the onset of winter boosts energy consumption.

The energy price cap is set to rise by £139 a year (12 per cent) to £1,277 (for a typical gas and electricity customer) a year from 1 October, but a larger increase of £153 (13 per cent) a year will affect pre-payment meter customers. Pre-payment meter customers are also overwhelmingly on a variable rather than fixed-rate tariffs and so will be more swiftly affected by these price rises.

With four-in-ten UC households on a pre-payment meter, compared to just one-in-ten non-UC households, they are set for even greater energy bill increases than other households.

Jonny Marshall, Senior Economist at the Resolution Foundation, said “Low-income families are facing a cost of living crunch on several fronts this autumn with energy bills rising alongside wider price increases, while Universal Credit is also due to be cut by £20 a week.”

“Around 15 million households are set to face higher prices next week when the energy price cap is raised. This will be particularly acute for low-income families on Universal Credit, who are four times as likely as the rest of the population to be on pre-payment meters, and therefore face even bigger increases to their bills.”

“The Government must ensure that the cost and volatility of rising energy bills doesn’t fall entirely on households, for example by making support schemes like the Warm Homes Discount more widely available to households, and maintaining the £20 a week uplift to Universal Credit.”

“In the longer term we can do more to protect low-and-middle-income households from volatile energy price shocks by ensuring the country is less reliant on imported fossil fuels with an extensive home efficiency retrofit scheme, while ramping up renewable energy generation and storage.”